How One’s Age Affects a Credit Score
Is it possible for a younger person to have a high credit score, say above 720? Yes, it is possible, but if you are under 29, chances are high that your credit score is around 635, which is the average credit score for those between the ages of 18 and 29.
Even young people who pay their bills on time and don’t accumulate too much debt tend to have lower credit scores because about 15% of one’s credit score depends on the length of the credit history, meaning the time that one has been using credit. Therefore, older people who have a credit history of twenty or more years, get a boost in their credit scores simply because they’re older.
One of the three major credit bureaus released information in 2005 about the average credit score for various age groups. These figures are as follows:
| Age Group | Credit Score |
|---|---|
| 18 – 29 | 637 |
| 30 – 39 | 654 |
| 40 – 49 | 675 |
| 50 – 59 | 697 |
| 60 – 69 | 722 |
| 70 plus | 747 |
How Inquiries Affect Your Credit Score
A credit inquiry is a notation made on your credit report when a business pulls your credit report. The number of credit inquiries that appear on your credit report affect your credit score; however, they constitute only a small percentage of your overall FICO credit score. Too many credit inquires on your credit report can lower your score, but usually not significantly. A good estimate is to assume that each credit inquiry will lower your FICO credit score by no more than five points; however, many credit inquiries do not lower your credit score at all.
FICO counts all credit inquiries made by mortgage or auto lenders in any two-week period as one credit inquiry and does not consider any credit inquiries made by mortgage or auto lenders within the previous 30 day period when calculating your score. Therefore, if you are shopping for a mortgage or auto loan and apply for financing with many different companies within a two-week period, all of the inquiries will be counted as one credit inquiry and your FICO credit score would be lowered by about five points at the most, if at all.
One can see how applying for a new credit card every three months could negatively affect the credit inquiry section of your credit report. Statistics show that those who have more than six credit inquiries on their credit reports are much more likely to file for bankruptcy than those who have none; therefore, watch out for the number of credit inquiries and stop applying for credit if you have too many.
If you already have too many credit inquiries just stop applying for credit for awhile. Credit inquiries do not remain on your credit report forever, only up to two years and then they must be removed as required by federal law. More importantly, only credit inquiries made within the last twelve month period are used in calculating your FICO credit score. Also, note that pulling your own credit report does not count as a credit inquiry; neither does it count when a prospective employer pulls your credit report to make a hiring decision or when a current creditor looks at your credit report.
Finally, don’t assume that having zero credit inquiries on your credit report is a good thing. For people who have established credit histories and a good mix of credit (mortgages, auto loans, credit cards), it is a good thing. For those who haven’t used credit at all or have a short credit history, having zero credit inquiries could lower your credit score. By the way, the average consumer has only one credit inquiry on his credit report and about 5% of consumers have more than four credit inquiries on their credit reports.
Editor’s Note:
We at Jewelry Outlet always want to remind our customers why it is important for them to obtain and responsibly use credit. One helpful way to improve one’s credit is by adding a trade line and then only using a small portion of the trade line. This is an example of utilization, which is 30% of the credit score calculation. Thus with a top score of 850, the utilization category is 255 points of the total credit score (850 x .30).
If someone had one department store trade line of $500, but had maxed out the trade line by charging $500 of goods and services, then this person would lose almost all of the 255 points (out of 850), having a very high utilization of 100%. Thus assuming all other things on the person’s credit report were good, the highest credit score this person could achieve might only be 595 (850 – 255), as this person might lose all points for having a high utilization.
But if this person obtained another trade line (maybe a jewelry store account) for $5,000, now the person’s utilization would be only 9% ($500/$5,500). Thus this person’s credit score would increase, maybe by as many as 200+ points, possibly bringing the score up to over 800.
The person’s interest rate on an auto loan with a 595 score might be as high as 20%, whereas the interest rate with an 800 credit score might only be 2% to 5%. If someone purchased a $20,000 car, the lower interest rate would save $250 per month, for having good credit and low utilization.
This is the power of low utilization. And this why it is important to obtain a jewelry store trade line with a high limit.
Jewelry Outlet is the number one online jewelry retailer to help you enhance, establish and/or rebuild your credit. We offer easy credit terms for people with bad credit, new credit and no credit. Click here to Apply for Credit
Posted by Christian C Culpepper