A credit score is a number that helps lenders evaluate a person's credit report and estimate his or her credit risk. The most common credit score is the FICO score, named after software developer Fair Isaac and Corporation. A person's FICO scores are provided to lenders by the three major credit reporting agencies – Experian, TransUnion and Equifax – to help lenders evaluate the risks of extending credit or loaning money to people. (To learn more about credit ratings, read: The Importance Of Your Credit Rating.)

TUTORIAL: Credit And Debt Management: Repairing Credit

A person's credit score affects his or her ability to qualify for different types of credit and varying interest rates. A person with a high credit score may qualify for a 30 year fixed-rate mortgage with 3.8% annual percentage rate (APR). On a $300,000 loan, the monthly payment would be $1,398. Conversely, a person with a low credit score, assuming he or she qualifies for the same $300,000 mortgage, may pay 5.39% on the loan, with a corresponding monthly payment of $1,683. That's an additional $285 per month, or $102,600 over the life of the mortgage, for the person with a lower credit score.

Unfortunately, we don't start with a clean slate as far as credit scores are concerned. Individuals have to earn their good numbers, and it takes time. Even when all other factors remain the same, a person who is younger will likely have a lower credit score than an older person. That's because the length of a credit history accounts for 15% of the credit score. Young people can be at a disadvantage simply because they do not have the depth or length of credit history as older consumers.

Factors That Affect Credit Scores
Five factors are included and weighted to calculate a person's FICO credit score:

  • 35%: payment history
  • 30%: amounts owed
  • 15%: length of credit history
  • 10%: new credit and recently opened accounts
  • 10%: types of credit in use

It is important to note that FICO scores do not take age into consideration, but they do weight the length of credit history. Even though younger people may be at a disadvantage, it is possible for people with short histories to get favorable scores depending on the rest of the credit report. Newer accounts, for example, will lower the average account age, which in turn could lower the credit score. FICO likes to see established accounts. Young people with several years worth of credit accounts and no new accounts that would lower the average account age can score higher than young people with too many accounts, or those who have recently opened an account. (For additional reading, check out: How Can I Improve My Credit Score? )

Average Credit Scores by Age
FICO scores range from a low of 300 to a high of 850 – a perfect credit score which is achieved by only 1% of consumers. Generally, a very good credit score is one that is 720 or higher.

This score will qualify a person for the best interest rates possible on a mortgage and most favorable terms on other lines of credit. If scores fall between 580 and 720, financing for certain loans can often be secured, but with interest rates rising as the credit scores fall. People with credit scores below 580 may have trouble finding any type of legitimate credit.

Based on data compiled by Credit Karma, there is a correlation between age and average credit scores, with scores rising along with age. According to their data, the average credit score by age is as follows:

Age Credit Score
18-24 638
25-34 652
35-44 659
45-54 685
55+ 724

Keep in mind, these are averages based on limited sampling of data, and many individuals' credit scores will be above or below these averages for a variety of reasons. A twenty-something, for example, could have a credit score above 800 by making careful credit decisions and paying bills on time. Likewise, a person in his or her 50s could have a very low credit score because he or she took on too much debt and made late payments. The FICO credit scores take all five factors into consideration.

The Bottom Line
The Experian National Credit Index study helps explain how the behavior of certain age groups can affect average credit scores. The study found that people in the 18-39 age group had the greatest number of late payments during the previous 12 months; that the 40-59 age group held the greatest amount of debt; and the 60+ age group had the lowest average credit utilization (used the least amount of credit that was available to them).

Though it is not unheard of for a young person to have a stellar credit score, more commonly these ratings rise as people acquire credit, make careful credit decisions, pay bills on time, and gain depth and length in their credit histories. (For additional reading, check out: The Road To The Worst Credit Score Ever. )

Related Articles
  1. Credit & Loans

    Credit Card Review: QuicksilverOne Rewards

    Learn more about one of the best cash back rewards credit cards for individuals with average or good credit ratings: the Quicksilver Rewards from Capital One.
  2. Budgeting

    Key Questions to Ask Before Moving in Together

    Moving in together is a big step. Here are some key financial questions to ask your partner before you make the move.
  3. Credit & Loans

    10 Ways Student Debt Can Destroy Your Life

    If you're getting a student loan, think critically about how you will manage your loan. Student debt could have a profound negative impact on your life.
  4. Credit & Loans

    Your Credit Score: More Important Than You Know

    Credit scores affect key aspects of your personal and professional life. Knowing your score and managing your credit input can make a big difference.
  5. Credit & Loans

    Bad Credit? You Can Still Get a Home Equity Loan

    If your credit history is less than stellar and you need cash, you may be able to get financing – but it will come at a price.
  6. Credit & Loans

    Difference Between Restructuring and Refinancing

    Refinancing and restructuring are very different debt reorganization processes to improve finances and avoid bankruptcy.
  7. Credit & Loans

    Does a Lost or Stolen Credit Card Hurt Your Credit Score?

    Learn the ways in which a lost or stolen credit card can hurt your credit, and understand the steps you can take to protect yourself if this happens.
  8. Credit & Loans

    Refinancing vs. a Home-Equity Loan: How to Decide

    If you want to pay off debt, make home improvements or just get a better interest rate, you need to know exactly what these terms mean.
  9. Credit & Loans

    Millennials Guide: How to Pick the Right Mortgage

    Here’s help in finding the perfect, affordable loan for that home you have been dreaming about.
  10. Credit & Loans

    How Regulations Protect Reverse Mortgage Borrowers

    They're complex animals, which is why there are government guidelines in place to protect borrowers.
  1. Will my credit score suffer from debt consolidation or refinancing?

    You have several options for reducing your debt burden. You can enroll in a professional debt management plan, or consider ... Read Full Answer >>
  2. Can I file for bankruptcy more than once?

    Filing bankruptcy is never a simple decision, but sometimes it is the best thing you can do in your current financial situation. ... Read Full Answer >>
  3. Why would someone change their Social Security number?

    In general, the Social Security Administration, or SSA, does not encourage citizens to change their Social Security numbers, ... Read Full Answer >>
  4. What types of liens are seen as good and which are bad for my credit?

    Creditors that allow purchases to be made through financing often require property to be pledged against a credit account; ... Read Full Answer >>
  5. What are the typical requirements to qualify for closed end credit?

    Typical requirements for a consumer to qualify for closed-end credit include satisfactory income level and credit history, ... Read Full Answer >>
  6. What is the best way to start to rebuild your credit after a bankruptcy?

    Bankruptcies can be devastating to your credit score. Even worse, a bankruptcy will be listed on your credit report for between ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  2. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  3. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  4. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  5. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  6. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!