The Evolution of Credit Scores Across Generations
A fascinating study conducted by the leading credit rating agency Experian unveils a positive trend in credit scores across different generations. The analysis showcases a consistent enhancement in average credit scores as we progress from Generation Z to the Silent Generation.
Notably, the Silent Generation, aged 78 and above, boasts the highest FICO 8 score, signifying exceptional creditworthiness within this age group.
How Credit Scores Breakdown by Generation
As of 2023, the average credit score for all Americans stands at 715, showing a modest improvement from the previous year.
The range of credit scores spans from 680 for Generation Z to 760 for the Silent Generation. This disparity underscores the notable increase in creditworthiness as we move through different age brackets. Millennials, Generation X, and Baby Boomers also exhibit incremental improvements in their average credit scores.
While age itself isn’t a direct determinant of credit scores, longer credit histories among older consumers contribute to their higher scores compared to younger individuals.
Average FICO 8 Score by Generation
| Generation | 2022 | 2023 |
|---|---|---|
| Generation Z (ages 18-26) | 679 – Good | 680 – Good |
| Millennials (27-42) | 687 – Good | 690 – Good |
| Generation X (43-58) | 707 – Good | 709 – Good |
| Baby Boomers (59-77) | 743 – Good | 745 – Good |
| Silent Generation (78+) | 760 – Very Good | 760 – Very Good |
Credit card balances in the US have been steadily increasing, surpassing $1 trillion by the end of Q4 2023.
How Credit Scores Are Calculated
Credit scores are calculated using various models, with the FICO 8 score being the most widely adopted by lenders. This score considers five key factors, including payment history, credit utilization, length of credit history, new credit inquiries, and credit mix.
- Payment history reflects 35% of your score impact, emphasizing the importance of timely payments.
- Credit utilization, accounting for 30%, focuses on your debt relative to available credit.
- Length of credit history, at 15%, considers how far back your credit accounts extend.
- New credit inquiries and credit mix also impact your score, albeit to a lesser extent.
How Is My Credit Rating Determined?
Major credit rating agencies assign three-digit scores indicating your credit usage and repayment habits. Lenders use this score to evaluate your creditworthiness when you apply for loans or credit cards.
What Is a ‘Good’ Credit Rating?
A credit rating of 670 or above is generally regarded as good. Scores below 670 are considered fair or poor, while those above 670 fall into the categories of good, very good, or exceptional.
How Can I Find Out My Credit Score?
You can easily check your credit score online through platforms like Credit Karma and various financial apps. Additionally, you are entitled to a free credit report from each major credit reporting agency yearly, accessible at AnnualCreditReport.com.
What States Have the Highest and Lowest Credit Scores?
In 2023, Minnesota boasted the highest average credit score at 742, while Mississippi had the lowest score at 680.
The Bottom Line
Recent data reflects a positive trend in average credit scores, albeit with concerns about increasing credit balances. The future outlook for credit scores remains promising but may face potential financial challenges.
Stay informed about your credit health and be mindful of managing your finances prudently.