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Life Stages and Your Credit
When it comes to your credit, does older mean wiser?
Findings:
Released June 2005
- Over the past 12 months, U.S. consumers age 30 – 39 had the highest number of late payments.
- Consumers age 50-59 held the highest national debt average.
- 55% of Americans put at least 5% of their income toward a retirement fund.
- The average PLUS Score® for consumers 70 or older was 747—the highest of any age group.
Believe it or not - you are making history, every day. And it’s written in your
credit report. Your report captures your personal credit information as
reported to a credit bureau. As you go through different life stages, your
report reflects the impact some of these financial events have on your credit
over the course of a lifetime.
In this study, the Experian National Score Index took a look at some key life
events and the impact of credit in the following six age groups:
| The Early Years |
The Middle Years |
The Golden Years |
| Ages
18-29 |
Ages
40-49 |
Ages
60-69 |
| Ages 30-39 |
Ages 50-59 |
Ages 70+ |
The Early Years (ages 18-39)
They have the highest number of late payments.
What’s their average score?
The first time you apply for credit as an adult, you initiate a lifelong
relationship with your credit report. That’s what Sandy did after she turned
eighteen – when she applied for a card through her favorite department store.
Her first inquiry occurred when this creditor requested a credit check. Because
she did not have an existing credit report, this inquiry started her credit
file with the credit bureau. Now that she has at least one reported account,
the information in her report can be used to calculate a credit score.
Applying for credit cards, buying a car, or purchasing your first home can be
significant events for you and your credit report at this time. Your report
contains information on how you’ve managed your credit when you borrow and
repay money. For some, managing credit may not be easy. However, keep in mind
that having a late payment can negatively affect your credit score and may hurt
your future credit opportunities.
The Experian National Credit Index study found:
-
The 30-39 age group had the highest number of late payments during the past 12
months, with an average of 1.37.
-
The average PLUS Credit Score for this group was also the second lowest of the
six groups - at 654.
The Middle Years (ages 40-59)
Meet the consumers with the most debt.
At this time in your life, you may rely on the borrowing power of your credit
more than ever as you continue to make large purchases, or even apply for a
home equity loan or line of credit. As Sandy became older, her financial
responsibilities increased. And with a family of her own, having a solid credit
report became more important at this time in her life when she took out a loan
to finance her child’s education.
Of the six age groups in the study, the Experian National Score Index found:
-
The 50-59 age group held the highest amount of debt, with an average debt
amount of $21,256 (excluding mortgage loans).
-
The average PLUS Credit Score for this group is 697.
How much are consumers spending on their debt obligations? In a related study,
the Experian-Gallup Personal Credit Index found most Americans spend an average
of 26% of their income on their monthly debt (not including mortgage or rent).
The Golden Years (ages 60+)
Do credit scores get better with age?
At this stage in your life, you may have paid off your major financial
obligations, such as a home loan or home equity line of credit. When Sally
reached her retirement age, she had finished paying her children’s school loans
and her mortgage. With lower debt responsibilities, she began to take
additional notice of the impact her credit utilization had on her score. Credit
utilization is based upon the total balance amount as it relates to the total
credit limit. Consumers should consider keeping their credit utilization well
below their credit limit. Having a high balance-to-limit ratio can have a
negative effect on credit scores.
In this study, the Experian National Score Index found:
-
The 70+ age group showed the highest average PLUS Credit Score of the six
groups at 747
-
This group also had the lowest average credit utilization – at 13.3%.
As Americans prepare for retirement, the Experian-Gallup Personal Credit Index
found more than 55% of Americans put at least 5-10% of their income toward
their retirement fund.
As you can see, there are several factors that can impact your credit score,
including the timeliness of your bill payments, amount of debt, and credit
utilization – but responsible credit behavior can benefit you at any age. Your
credit report stays with you for life, and can be key to major financial events
in your lifetime. Understanding your credit report is beneficial at all stages
in your life.
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