Fact or Fiction: Does Age Affect My Credit?

A popular saying states age is just a number. Or is it? When it comes to credit scores, consumers may ask themselves whether their age will affect their ability to obtain new credit or loans. While there are some beliefs that hold true, there are plenty of misconceptions about age and credit. 

Here are frequently asked questions consumers may have:

Will Lenders Consider the Age Listed on My Credit File?
While your credit report will list your date of birth under the personal information heading, there are limits to whether lenders will factor in your age. According to the provisions of the Equal Credit Opportunity Act (ECOA) it is legal for a lender to consider your age as long as they do not discriminate against persons age 62 or older. However, both the VantageScore and FICO credit scoring systems do not take into account age when calculating your credit score. The age of your credit lines – instead of wrinkles – will be a major factor.

How Does the Age of My Credit Impact my Score?
While your age by itself won't necessarily impact your credit score, lacking a substantial credit history may hurt you. Lenders will most likely consider the length of your credit and payment histories, which will influence whether you can qualify for your next loan because this record will establish your credit worthiness. 

To calculate your credit score, lenders will input the age of your oldest account as well as the median age of all your accounts. Younger consumers who are just starting credit lines and payment histories may have lower scores. 

On the other end of the spectrum, older consumers tend to have better credit and are perceived as less of a credit risk. The reason for this is these consumers have had more time to build up their credit score through opening different types of credit accounts and having a longer history of on-time payments.

The age of a consumer will likely impact their financial standing as outstanding debt often affects younger consumers. When borrowers are young, they tend to take on more student loans and credit card debts to pay for books, tuition and other expenses in and out of school. The high rate of utilization on their credit cards combined with late or nonpayment could result in lower credit scores.

Does How Long I Have a Credit Card Matter?
Having an excellent credit score should reflect how many types of credit you have, including whether you have a credit card. You should have a credit card that you have had on-time payments for a significant amount of time. But while length of time is important, you should also take into account how often you use your credit card. 

When you do not use or have a credit card, your score may drop significantly. Lenders will often take into consideration the utilization rate, which is your combined credit card balances divided by your overall credit card limits. A zero utilization rate will negatively impact your credit score. According to a study by Credit Karma, consumers with a 0 percent credit card utilization had an average credit score of 678. Compared to this group, those with a credit card utilization of just 1 to 10 percent had the highest average credit score of any other rate with 745, which is 16 points more than the next highest average score. 

Once you obtain a credit card after being approved, maintain your credit score by making small purchases each month and paying off the balance in its entirety to have a healthy utilization rate.