In case you were wondering, there most certainly is a correlation between credit score and age.
What’s that relationship, you ask? Well, in a nutshell, it’s that the older we get, the higher our credit scores tend to be.
And it’s not an accident, as credit history and depth of credit play a huge role in what credit score we end up with.
This is the catch-22, chicken vs. egg problem. How does one establish credit without having any to begin with?
Over at Fico, they explicitly note that credit history is the third most important scoring factor, behind only amounts owed and payment history.
Your credit history takes into account, well, your accounts and their standing. So basically how many accounts you have, how long they’ve been open, and what their status is.
This also entails payment history, the number one driver of credit scoring for the Fico score, so essentially half your score has to do with your history.
For VantageScore, they use the term “depth of credit,” which while it only makes up eight percent of your score, is flanked by payment history at 28 percent.
Combined, they determine more than a third of your credit score.
In any case, if you’ve got late accounts on your credit report, your credit score will be lower than a consumer with all current accounts. Pretty basic stuff.
Old Folk Have Higher Credit Scores?
But why are the older folk winding up with higher credit scores than the young bucks?
Are older consumers wiser than their younger counterparts, or is just a game that favors those that have been around longer?
It’s probably a bit of both, though all things being equal, an older consumer will have a better credit score than a younger one based on the length of credit history alone.
Now there is a caveat – suppose a young consumer got started early, and got co-signed on a parent’s credit card at 16, then got an auto loan before they turned 20, and a mortgage at 21.
They’d have a lot more credit history than a 40 year old that opted to rent and pay for everything in cash over the years.
So it’s not as simple as it seems. But this article deals with the “average” scenario, not everyone in every single instance.
The point I’m trying to make is that older age doesn’t necessarily equal longer credit history.
If you don’t actively build credit, it doesn’t really matter how old you are…
Read more: How to improve your credit score.