- Credit scores depend on account history, missed payments and number of accounts.
- Average credit score data shows that older individuals tend to have higher scores.
- Learning about risk factors and credit report creation can help improve your score.
Credit scores dominate spending and decisions, but few people know the details of this outstanding figure.
FICO created the first credit scoring model in 1989, and it is known today as the most widely used and accepted credit score. While FICO provides the credit scoring algorithm, the three major credit bureaus—Equifax, Experian, and TransUnion—provide data for credit reports.
Rod Griffin, senior director of consumer education and advocacy at Experian, suggests making a plan before you open a line of credit.
“Credit is a financial tool, debt can be a financial problem,” Griffin says.
Manage your finances like a pro.Sign up for The Daily Money newsletter.
What is considered a good credit score?
According to Experian, about 67% of Americans have a FICO credit score of 670 or higher, ranking them as “good,” “very good,” or “exceptional.”
- 300-579: Poor
- 580-669: Fair
- 670-739. OK
- 740-799. Very good
- 800-850: exceptional
While these numbers are a starting point, loan business representatives believe the answer is not so simple.
“A score of 750 or more would be considered high prime or very good, and you’re likely to qualify for the best terms and rates,” says Griffin. “When your score drops below 680, they start to fall into the subprime category, which means you can default, and if you do, you’ll have to pay much higher interest rates.”
The credit score is based on a number of factors. Payment history is one of the biggest components. making payments on time can help your score, while missing payments or filing for bankruptcy can hurt your score. Recently opened accounts, applying for new accounts, and the age of your accounts can affect your credit score. Experian also writes that “credit mix,” or managing installment accounts (car loans and mortgages) and revolving accounts (lines of credit) can positively impact credit scores by showing responsibility.
When lenders check your credit for loans, mortgages or credit cards, they have different risk tolerances.
“A score used for auto loans will weigh the information a little differently than a score designed to predict the risk that you will repay your mortgage as agreed,” says Griffin. “Two lenders use the exact same score, you can say one score is acceptable and the other may require a better score.”
Do you qualify for unemployment?You may qualify even if you quit, an attorney shares
What is a good credit score by age?
You don’t have to have a “good” credit score at any age. a good score is a good score. But while age isn’t used to calculate credit scores, data shows that averages rise as people with credit get older.
According to American Express, that’s because older people have simply had more time to build credit. With an older individual, there is a longer account history, more payments to pay consistently on time, and often more income. Young people who check their credit score may be surprised by a low number, but that doesn’t mean they’ve done anything wrong.
“They have very little credit history, what we call a thin credit file, or they may have no credit history at all, and so there’s nothing to be evaluated on or used to calculate a score,” Griffin says.
Averages aren’t a one-size-fits-all statistic, but there does seem to be a correlation between age and credit score.
Here are the average FICO scores by age from 2019, according to American Express:
- 20-29 years old: 662
- Age 30-39: 673
- 40-49 years old: 684
- Age 50-59: 706
- Age 60+: 749
Reviewed byThe best credit cards of 2022
How do you check your credit score?
You can get a free credit report at AnnualCreditReport.com from each of the three credit reporting agencies. But while these credit reports include identification history and personal credit information, they don’t include credit scores.
According to the Federal Trade Commission, you can get a free credit score from a credit bureau or by registering with the bureau’s credit monitoring system.
“Don’t be afraid to check your credit report, it doesn’t affect your credit score,” says Griffin. “If you don’t look at the report, you don’t know what’s in it. There’s nothing you can do about it.”
What is the difference between a credit score and a credit report?
Credit reports include information about how you use your credit and the financial resources available to you. Credit scores are tools used by lenders to analyze that information.
Griffin uses this analogy. In school, a term paper is like a credit report. Your grade on that paper is the credit score, and the bank is the teacher who reviews and assigns the grade.
What to bring to a job interview?Here’s what you should (and shouldn’t) bring.
Who is the richest person in the world?It’s not Jeff Bezos anymore.
How do you improve your credit score?
Factors that can contribute to a bad credit score include payments more than 30 days late and the utilization rate. The utilization rate is the amount you have to divide by your credit limit. A low interest rate is often a good sign because it means you’re using less of your available credit and you’re on track without overspending.
The easiest way to improve your credit score is to learn and address your risk factors and stay on top of your payments.
“If you can pay off your credit card balances, you’ll see an improvement in your credit score,” says Griffin.
Just curious.We’re here to help answer life’s everyday questions