The average FICO credit score hit an all-time high this year, reaching 704 and continuing an upward trend that began about a decade ago. Scores are increasing because more people are checking their credit and staying informed, and because of new standards for how negative information on your report is handled.
But older folks still tend to have better scores.
Americans 60 and up have an average score of 747, the highest of any generation, while those between 18 and 29 have an average of 659. Each generation increased five points on average from a year ago. The exception: Americans in their 50s, whose scores increased an average of four points.
Experian's 2017 State of Credit report similarly found that Generation Z, defined as those 18 to 20 years of age, had the worst credit scores of any age group.
"Keep in mind that age is not considered in the FICO Score, but when we look at typical behavior according to what predictive credit data is considered by the score, it makes sense why older consumers score higher than younger consumers," Tommy Lee, principal scientist at FICO, tells CNBC Make It. "Older consumers have longer credit histories, as one might expect and, in general, longer credit history equates to higher credit worthiness."
"In addition, fewer older consumers are searching for credit and opening new accounts. Our research shows that the recent opening of credit accounts represents greater risk, especially for those without long credit histories," Lee adds.
A credit score is a measure of how trustworthy you are to financial institutions. It's calculated based on payment history, how much you owe, your length of credit history, the types of credit you have and how often you apply for new credit. Paying bills on time and keeping your balances low counts for about 65 percent of your score.
"Everything else builds on those two factors," Rod Griffin, director of consumer education and awareness at Experian, tells CNBC Make It.
Among the many perks of a high credit score is a lower interest rate on a loan, whether you're borrowing to afford a house, a car or someone's college tuition. Scores in the "excellent" range qualify you for the best credit cards.
FICO scores range from around 300 to 850. An excellent score is one of 750 or above, while anything below 650 is problematic. And relatively small differences can add up. A score of around 780 could save you more than $10,000 in interest over the course of a 30-year mortgage compared to a score that's only 100 points lower.
Still, "if you're 700 or above, you'll generally be considered prime," says Griffin. "You may not get the best rates, but you'll typically qualify."
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