What Is a Good Credit Score for Your Age?

A good credit score can help you save a lot of money in the long run. Striving to raise your score as much as possible — regardless of your age — can help you get more control over your finances.

However, it’s easy to look at the maximum 850 FICO score early in the journey and feel discouraged. Reaching that credit score takes a long time, and most people don’t get there. In fact, you don’t even need an 850 credit score to get the benefits that come with a good score.

Knowing how you compare with peers in your age group can offer a better perspective of where you currently stand. If you are below the benchmark, you can use it as inspiration to tighten your finances and pay off your debt.

Why Do You Need a Good Credit Score?

Your credit score is one of the most important numbers within your financial profile. While a credit score can help you get good loans, the benefits stretch far beyond that perk.

The Importance of a Good Credit Score

A good credit score makes it easier and more affordable to borrow money. Lenders will let you take out higher loans and set lower interest rates on your debt. Borrowers with good credit get these advantages because they are less risky for lenders.

Financial institutions, credit unions, and online lenders want to work with borrowers who are very likely to make on-time payments. They can feel more confident in the likelihood of receiving a return on their investment.

A good credit score is essential even if you don’t plan on buying a house. Many landlords will look at your credit score during the tenant screening process. A high credit score tells the landlord that you are more likely to make on-time rent payments. A good credit score can even reduce your monthly insurance premiums and utility bills.

Lower costs and access to more capital will impact where you live. Someone with a good credit score will get a lower interest rate on their mortgage and end up with a lower monthly payment. This perk gives a borrower more flexibility in the type of neighborhood they live in and the size of their house. A good credit score directly impacts your finances and indirectly affects the areas of your life that are tied to finances.

How Credit Scores Are Calculated

There are two credit scoring models: FICO and VantageScore. FICO is the more established standard that has been around since 1989, while VantageScore was released in 2006. Experian, TransUnion, and Equifax joined forces to create the VantageScore.

Each scoring system has multiple categories that influence your score. The FICO score has only five categories, which are highlighted below:

• Payment history: 35%
• Credit utilization: 30%
• Length of credit history: 15%
• Credit mix: 10%
• New credit: 10%

VantageScore has more components that consumers have to keep in mind. The VantageScore model considers these factors:

• Payment history: 41%
• Depth of credit: 20%
• Credit utilization: 20%
• Recent credit: 11%
• Balances: 6%
• Available credit: 2%

The percentages for these categories were changed in 2017 as a part of VantageScore 4.0. Both scoring systems heavily reward consumers who make on-time payments and keep their credit card balances low or at zero.

What Is a Considered Good Credit Score?

A good credit score depends on the model that you use. FICO score and VantageScore systems set different expectations for consumers.

FICO Score

A 670-739 FICO score is considered a good score. The FICO score is a range from 300 to 850.

VantageScore

A good VantageScore falls between 661 and 780. VantageScore recently adopted the same 300-850 range as the FICO scoring system. This change began with VantageScore 3.0 and was preserved under VantageScore 4.0.

Age and Credit Scores: Is There a Connection?

There are several factors that drive credit scores, but older people tend to have higher credit scores. Older individuals have had more years to advance in their careers and increase their annual income. A higher income is usually associated with a higher credit score since extra money makes it easier to stay on top of payments.

Older people have also taken out more loans and paid them on time. As people get older, their credit accounts also get older, which indicates more experience to a creditor. Older credit accounts will improve your credit score.

Younger people can still end up with high credit scores if they remain financially responsible. A credit card offers an easy starting point for people who want to build credit, but this financial product must be used responsibly.

What Is a Good Credit Score for Your Age?

A good FICO score falls in the range of 670-739, while a good VantageScore ranges from 661 to 780. You should aim for those levels and do your best to exceed them. However, knowing where each age group stands can offer a better perspective as you embark on your credit-building journey. The numbers below come from Chase Bank.

For People Under 20

Most people in this group do not have a credit score. This group isn’t likely to exceed the average credit score of 662 set by people in their 20s.

For People in their 20s

People in their 20s have an average credit score of 662. It’s barely within the confines of a good VantageScore and is just short of being a good FICO score.

For People in their 30s

People in their 30s typically have a 672 credit score. These individuals have made more money from their careers and will likely have several loans and lines of credit.

For People in their 40s

People in their 40s average a 684 credit score. Credit accounts continue to get older and result in higher credit scores.

For People Over 50

People who are 50 years or older have an average credit score of 706. The average credit score jumps to 749 for people who are 60 years or older.

How to Build A Good Credit Score

A good credit score will open up more financial opportunities. You can use these tactics to add points to your score over time.

Review Your Credit Reports Regularly

Checking your credit reports periodically will give you a better understanding of where you stand. You can detect any errors and see which items are having a negative impact on your score. Staying on top of your credit reports will keep your credit score in your mind and can lead to better financial decisions.

Pay Your Bills on Time and Reduce Debt

This is the foundation for any credit-building strategy. Payment history makes up 35% of your FICO score and 41% of your VantageScore. Reducing debt will improve your credit utilization ratio, a component that makes up 30% of your FICO score and 20% of your VantageScore.

Using a budget and making more than the minimum monthly payment can help you stay on top of debt. While trimming expenses can help, you may eventually need to pick up a side hustle or advance in your career. Paying bills becomes easier when you prioritize income growth over trimming every last expense until you only spend money on the essentials. Focusing on both at the same time can yield the best results, but there are diminishing returns with cutting expenses in the long run.

Keep Your Balances Low

A lower credit card balance is easier to pay off and will accrue less interest. Some people stay in credit card debt for several years because interest accumulation prevents them from chipping away at the principal.

Each time you use a credit card, you are spending tomorrow’s money on a purchase for today. Spending too much of tomorrow’s money before it arrives can lead to a downward financial spiral. Tracking your expenses and prudently paying off your credit card as soon as it has a balance can keep the balance at a low level.

Improve Your Credit Mix

A credit mix consists of several credit accounts. As you get older, you may accrue several loans and lines of credit such as auto loans, mortgages, credit cards, and others. Each credit account strengthens your credit mix and can improve your score. However, you shouldn’t use the pursuit of a better credit mix as a reason to get deeper into debt.

Avoid Opening New Accounts

You will have to open new accounts from time to time. If you want to buy a house, you will likely need a mortgage. An auto loan may be necessary when it’s time to buy a car.

However, you should avoid opening new accounts just for the sake of it. Opening a new credit card for a higher credit limit is rarely a good decision. It’s better to pay off your current credit cards and keep the balances low so you don’t have to open a new line of credit to borrow additional money.

Opening a new account often triggers a hard credit inquiry. This event will temporarily reduce your credit score. It’s a necessary part of the process for a mortgage or an auto loan, but it doesn’t make as much sense to rack up hard credit checks for new credit cards.

Get a Credit Builder Card

Speaking of credit cards, if you’re looking to open a card to improve your credit score, you may want to consider a credit builder card. These cards often require soft credit checks, which means your score will not take a hit. They are also usually secured credit cards and require you to make a security deposit. The security deposit becomes your credit limit, and you will get your money back if you close your card or upgrade your credit builder card to a traditional card.

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