- Credit scores are based on account history, missed payments, and number of accounts.
- Average credit score data shows that older individuals typically score higher.
- Learning about risk factors and how to create credit reports can help improve your score.
Credit scores dominate spending and decisions, but few people know the ins and outs of this looming number.
FICO has created a file The first credit score model in 1989Today, it is known as the most widely used and accepted credit score. While Vico Provides algorithm For credit score, the three major credit bureaus – Equifax, Experian, and TransUnion – provide data for credit reports.
Rod Griffin, senior director of consumer awareness and advocacy at Experian, suggests making a plan before opening a line of credit.
“Credit is a financial tool, and debt can be a financial problem,” says Griffin.
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What is considered a good credit score?
According to Experian, about 67% of Americans have a FICO credit score of 670 and above, making it “good,” “very good,” or “exceptional.”
- 300-579: weak
- 580-669: just
- 670-739: Good
- 740-799: Very good
- 800-850: exceptional
While these numbers serve as a baseline, credit professionals feel the answer is not so simple.
“Scores of 750 or more will be considered a high prime number, or very good, and you will likely qualify for the best terms and rates,” Griffin says. “When your score drops below 680 or so, it starts falling into the sub-prime category, which means you may not qualify, and if you do, you’ll have to pay much higher interest rates.”
The credit score depends on a number of factors. Payment history is one of the biggest components – Making payments on time can help your score, While losing payments or filing bankruptcy hurts your score. Recently opened accounts, applying for new accounts, and the age of your accounts can all affect your credit score. Experian also writes that a “credit mix” or managing annuity accounts (auto loans and mortgages) and revolving accounts (lines of credit) can positively impact credit scores by demonstrating responsibility.
When lenders check your credit for loans, mortgages, or credit cards, they have a different tolerance for risk.
“The score used in auto loans will weigh the information a little differently than the score that was developed to predict the risk you will pay for your mortgage as agreed upon,” Griffin says. “Two lenders use exactly the same grade, one may say one grade is acceptable, and the other may require a better grade.”
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What is a good credit score by age?
There is not necessarily a “good” credit score to have at one age or another – a good score is a good score. But while age is not used to calculate credit scores, the data shows that averages tend to be higher as credit holders get older.
According to American Express, this is because seniors simply have more time to establish credit. with an older individual, There is a longer account history, More payments to pay consistently on time and more income more often. Young people who check their credit scores may be surprised by how few there are, but that doesn’t necessarily mean they’ve done something wrong.
“They have very little credit history, what we call a thin credit profile, or they may have no credit history at all, so there is nothing to rely on or use to calculate the score,” Griffin says.
Averages are not a one-size-fits-all statistic, but there does appear to be an association between age and credit score.
Here are the average FICO scores by age from 2019, according to American Express:
- Age 20-29: 662
- Age 30-39: 673
- Age 40-49: 684
- Age 50-59: 706
- Age 60+: 749
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How do you check your credit score?
You can get a file Free credit report on AnnualCreditReport.com from each of the three credit reporting agencies. But while these credit reports include identity history and personal credit information, they do not include credit scores.
According to the Federal Trade Commission, you You may be able to get a free credit score From the credit bureau or by registering in the credit bureau’s monitoring system.
“Don’t be afraid to check your credit report, it doesn’t affect your credit score,” Griffin says. “If you don’t look at the report, you don’t know what’s inside. You can’t do anything about it.”
What is the difference between a credit score and a credit report?
Credit reports include information about how you use credit and the financial resources available to you. Credit scores are tools that lenders use to analyze that information.
Griffin uses this analogy: At school, a classroom paper is like a credit report. Your grade on that paper is the credit score, and the bank is the teacher that reviews and determines the grade.
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How do you improve your credit score?
Factors that may contribute to a bad credit score include payments that are more than 30 days late and the usage rate. Usage rate is The amount you owe divided by your credit line. A lower rate is often a good sign because it means you are using less of your available credit and keeping track of it by not overspending.
The easiest way to improve your credit score is to know your risk factors, address them, and stay on top of payments.
“If you can pay off your credit card balances, you’ll see an improvement in your credit score,” Griffin says.