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When you think about getting older, you might focus on the negatives. You may not be able to jog as far as you once could, and you’ll notice a few smile lines and some gray hairs. However, lots of things also get better with age including fine wine, gourmet cheese – and your credit score. If you’ve been careful with your finances, you might have a healthy 401(k) to help with your finances or a well-deserved pension coming your way. Credit scores, in particular, tend to improve as we age.
Older consumers have higher credit scores than younger
A recent credit score study by Value Penguin showed the average Vantage credit score is 673 while the average FICO score is 695, across all age demographics. But if you drill down deeper into the numbers, you see many differences emerge based on characteristics – one of them being the age of the consumer. Across five age groups, there is a noticeable increase in credit scores the older we get.
Generation Z
For the youngest generation of kids, just out of college and getting started, the average credit score is lower than average, at just 631 for FICO. This age group was born in 1996 or later and tend to have one credit card, on average, and carry a little more than $1500 as a credit card balance. This generation tends to have a lower score but also much less debt than later generations.
Generation Y
This generation, born between 1995 and 1982, has double the debt of Gen Y and double the number of credit cards. Their credit score is just a few points higher than Gen Z. This group carries not only double the overall debt compared to the next youngest demo but also double the credit card debt and more than double the retail debt from sources like store-issued credit cards.
Generation X
Gen X’ers are born between 1967 and 1981 and have a much better credit score, averaging around 655 under the FICO calculation. These are consumers that are old enough to be parents and make up the bulk of the US workforce. This group carries the greatest amount of retail debt at almost $1400 and nearly the highest overall non-mortgage and auto debt at more than $42k.
Baby Boomers
Boomers were born between 1966 and 1947 and are on the cusp of retirement, although many are working longer than their parents did because of more restrictive (or non-existent) pension offers and greater debt. Baby Boomers have the greatest overall debt at almost $43k and carry the highest credit card balances at close to $7k while having much higher credit scores at around 700 in FICO terms.
Silent Generation
This generation was born between 1946 and 1925 and represents great-grandparents and retirees. Most are out of the workforce but benefits from the highest average credit score at an average of 730 on the FICO scale. They carry fewer credit cards than Boomers and half the credit card debt. Their overall debt is closer to Gen Y, and they tend to carry much less in retail debt.
Why do credit scores get better as we age?
One of the factors in the FICO calculation is the average age of credit. Older Americans often have credit card accounts they’ve had open for decades which can boost their score. The older you are, the more likely you are to have a diverse mix of credit including a mortgage, auto loan, and credit cards. Having an array of types of credit can also boost your score.
If you’re looking at retirement, but also stuck with overwhelming debt, bankruptcy might help you move into your golden years with less debt weighing you down. After bankruptcy, rebuilding your credit is the next step. To find out more about improving your credit after bankruptcy, talk to Credit Score Keys. Call 919-495-2365 today for a free consultation.
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