Credit scores can have a big impact on the opportunities available to you throughout life. Whether you’re a young adult who’s just come of age or a more mature member of society, people of all ages are impacted by the information that shows up on their credit report.
Young or old, a bad credit score can hurt your ability to get approved for a loan, cause you to pay more in interest over time, and impact where you live, what you drive and more. But does your date of birth play a role in calculating your credit score?
To find out, the Open Door Coalition talked with Amy Thomann, head of consumer credit education at TransUnion.
If you’re wondering if your upcoming birthday will cause your credit score to change, don’t fret, said Thomann. A person’s age is not factored into his or her credit score calculation.
“A credit score is a number from 300 to 850 that is calculated based on the information in your credit report,” she explained. “Payment history, how much available credit is used (credit utilization), length of credit history, number of credit accounts and other information are part of your credit report and considered when calculating score.”
While not directly taken into account, there are certain correlations between a person’s age and their credit score. Young people, for instance, tend to have lower scores than more established consumers. Thomann attributes this trend to how long a person has had the opportunity to establish credit.
“As you get older, you’ll have been part of the credit economy longer, and are more likely to have more of the credit information mentioned above,” she explained.
About 15 percent of your score is based on the age of your various credit accounts, which helps lenders determine how much experience you have in managing credit. What’s more, 35 percent of your score is determined by payment history — something that can only be proven over time.
If you’re just starting to build credit, Thomann suggested becoming an authorized user on a parent or guardian’s credit card account.
“As long as the credit card is being used and payments are being made on time, it can help you build a credit history,” she said.
Because so much of your life is impacted by your finances, it’s important to set financial goals and build a plan to achieve them — no matter your age, said Thomann.
“Credit touches all aspects of life, and healthy credit is essential to capitalizing on life’s big opportunities and interacting with the modern economy,” she said. “Sustained credit health is based on building good financial habits over time. Establish healthy habits by consistently paying all your accounts on time and keeping your credit utilization low.”