What Is the Average Credit Score by Age?

Posted on April 27, 2021 in Banking

According to Experian data collected in October, the average FICO score in the United States rose to 711 in 2020. That represents an eight point increase from the average in 2019, the best since a four point increase occurred from 2015 to 2016. Credit scores have actually been rising for the past decade (the average FICO score has increased in nine of the past 10 years), but this year’s increase stands out from other years. 

The average FICO score has typically only increased by a point or two each year, so eight points is rather remarkable, Also, consumers faced significant financial challenges, along with hundreds of other types of challenges, due to the coronavirus pandemic

What Has Caused This Growth?

The incredible growth of the average FICO score in 2020 can most likely be attributed to shrinking debt, decreased credit utilization, and an overall drop in late payments and delinquencies. 

Since the onset of COVID-19 in January of 2020, consumer debt management has trended in a very positive direction. FICO scores are calculated by using information from all of the consumer credit reports (Experian, TransUnion, and Equifax). When features of the consumers’ credit profile improve, their score will improve as well. 

Not all changes will have an immediate or noticeable impact, but improvement in the key areas of credits reports definitely will. Since 2019, consumers have seen record improvements in utilization rates, debt amounts, and the overall number of delinquencies. The most significant changes between 2019 and October of 2020 included:

  • The average credit card utilization decreased by 12%
  • The average number of consumer accounts that were ever labelled delinquent dropped by 10%

How Are Credit Scores Calculated?

FICO scores are based on five types on information that is found in your credit report:

Payment History

Typically the most important category in determining your credit scores will be your payment history as it represents 35% of your score. The Fair Credit Reporting Act will dictate how long negative information will stay on your credit report. Most negative marks, such as late payments, will last for up to seven years. 

Bringing past due accounts to current or performing rent reporting may help your scores, but negative marks will continue to have an impact for as long as they remain on your credit reports. The scoring model for payment history is based on three factors:

  • On time payments. A history of paying your bills on time is very good for your credit score.

  • Late payments. Payments that are made over 30 days late will typically be reported by your lender and will damage your credit score. How far behind that you are on a bill payment, the number of accounts that are showing late payments, and whether you have brought the accounts current are all contributing factors.

  • Public records. Filing bankruptcy can significantly harm your credit score.

Credit Usage

Credit usage is just behind payment history in terms of important to determining your credit score. This category will account for 30% of your credit score, and will include how much you owe on loans and how many of your accounts have balances. The main consideration for this category, however, will be your credit utilization ratio.

Your credit utilization ratio, or rate, will be determined by comparing the current balances with the credit limits on your revolving accounts, mostly to credit cards. In order to calculate your credit utilization ratio, simply add up the balances on all your credit card accounts, divide that number by the sum of your total amount of your credit card limits, and multiply by 100 to get a percentage. That percentage will be your credit utilization ratio, and typically the lower the ratio, the better your credit score. It’s best to keep your utilization rate under 30% if possible. 

Those with the best credit scores will typically use under 10% of their available credit. Paying down credit card balances or increasing the limit on your credit cards are both ways to lower your utilization rate and improve your score.

Length Of Credit History

You can help your credit score a lot by responsibly managing credit accounts over a long period of time. This category is 15% of your score and will look at the age of your oldest account, newest account, and the average age of all your accounts. The tricky thing about credit history is that there is no shortcut to building up a positive credit history. If you decide to close a credit card account while in good standing, it can remain on your credit report for up to 10 years, and may continue to help your credit score during that time. However, closing an account will reduce your overall available credit, which may result in a negative effect on your score.

Recent Credit Activity

Your recent credit activity isn’t a major contributor to your credit score as it will only make up about 10% of it. However, there are several things that can happen when you apply for and open up a new account. First, by submitting an application you may end up with a hard inquiry, or a record of the fact that someone reviewed your credit in order to make a lending decision. A hard inquiry can lower your credit score, as they may increase your risk as a borrower in the eyes of a potential lender. 

However, credit scoring models are also built to recognize that because a consumer is shopping for a loan, it doesn’t mean they are necessarily extra risky. After all, just because you get pre approved for six auto loans in order to find the best rate, it doesn’t mean that you will be taking out six different auto loans. As a result, multiple hard inquiries that occur within a 14 to 45 day window (depending on the scoring model) will typically only count as a single inquiry. 

Opening a new account can also impact your average age of your accounts, which could slightly impact your score. However, it will also increase your available credit and lower your credit utilization ratio, so there is somewhat of a trade off.

Types Of Accounts

Credit scoring models will also look at your experience in both revolving and installment credit accounts, although this will only account for about 10% of your score. Having a solid mix of account types will help improve your scores somewhat. 

There are some credit scores that are built for specific types of creditors, such as credit card issuers or auto lenders. Your experience with the corresponding type of account could be a more important factor for those types of scores. 

The FICO Average Score By Age Group

Average credit scores will vary by age groups, and typically, the older that someone is and the more experience they have dealing with credit, the higher that their credit will be. Members of the oldest group range, known as the silent generation and representing people age 75 and older, consistently have the highest average FICO score of any generation. In fact, they had an average FICO score of 758 in October of 2020, which is 47 points higher than the national average. 

Alternatively, the youngest generation of adults, named Generation Z and representing people aged 18 to 23, have the lowest average score. This group of adults has an average score of 674, which is 37 points lower than the national norm in October of 2020. However, regardless of age group, every generation saw its average FICO score improve over the course of the year. Here are the average scores for each generation in 2019 and 2020:

  • Generation Z (age 18-23): 

667 in 2019

674 in 2020 

an overall net gain of 7 points

  • Millennials (age 24-39): 

668 in 2019

680 in 2020

an overall net gain of 12 points

  • Generation X (age 40-55): 

688 in 2019

699 in 2020

an overall net gain of 11 points

  • Baby Boomers (age 56-74):

731 in 2019

736 in 2020

an overall net gain of 5 points

  • Silent Generation (age 75+):

757 in 2019

758 in 2020

an overall net gain of 1 point

The Takeaway

Much to the surprise of the financial industry, every age range saw their average FICO credit score increase from 2019 to 2020. While the silent generation has the best overall score, millennials and generation X both improved their score by an average of double digits from the previous year.

Credit scores have been improving for all age ranges over the last decade. The trend of the oldest generation having the highest score and the youngest generation having the lowest has continued on and most likely will always be the case. If you are concerned about your credit score, there are plenty of ways that you can improve it. Although times are a little bit bizarre due to the pandemic, there is never a bad time to get serious about how to fix credit yourself.

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