Did you know that age is an advantage in America when it comes to your credit score? The credit score system, known as the VantageScore, was created by credit reporting agencies, Experian, TransUnion and Equifax. VantageScores range on a scale from 300-850, with 850 representing exceptional credit.
You might be wondering, why is age a factor? There are several reasons. First, a long line of credit history builds up a higher credit score. Length of credit and payment history make up 50% of your credit score, while credit line balances, inquiries/new lines, and diversity of credit make up the rest.
Secondly, younger people may not have diverse credit, meaning mortgages, car loans, and credit cards. Purchasing a home or a car, which are more common for older generations, cultivates more well-rounded credit.
Lastly, average salaries are higher for older generations compared to younger. Advanced careers often yield bigger earning power. Younger consumers often qualify for smaller credit limits for these reasons, which in turn reflects in the debt-utilization ratio, thus impacting their credit scores differently than if they had substantial lines of credit with the same balances owed.
For reference, the average VantageScore by generation are as follows: (Source: Creditcards.com)
● 730 – Silent Generation (born between 1925 and 1946)
● 700 – Baby Boomers (born between 1947 and 1966)
● 655 – Generation X (born between 1967 and 1981)
● 634 – Millennials (born between 1982 and 1995)
● 631 – Generation Z (born 1996 and later)
Now you may be wondering, how can I improve my score, especially if I’m earlier in my career or have a lower score than you’d like to have? The answer is, establish healthy credit habits. Here are 4 recommendations for healthy habits to continue or start.
- Make your payments on time.
- Responsibly utilize your credit.
- Avoid new lines of credit if possible.
- Try not to carry high balances. Tip: Your goal should be for your credit balance to be less than 35% of your available credit.
By following these steps, your credit will improve, it just takes consistency and time. A healthy credit score helps you improve your home buying and improvement power. It’s an investment of time and focus that can pay off in dividends.