While credit generally improves with age, everybody is different. Some people’s credit history improves steadily after years of faithful payments, while others watch their scores plummet with every medical bill sent to collections or missed rent.
Then, there is another type of person: Maybe they never had to think much about their credit score because their spouse always had an excellent one and made all the big family decisions. But then something happens–a divorce or even a death. The credit-less survivor must start from scratch, on their own.
Sadly, building great credit can take time, especially for those struggling financially. We do have some good news, though. It is never too late to establish or build your credit. Read on to learn more.
Why is building great credit important?
When most people think about building excellent credit, they are usually looking toward the “dream” goals, like qualifying for a decent mortgage rate or auto loan. However, a good credit score can do a lot more than just make you look good to banks. It also makes you look more trustworthy to landlords, insurance companies, and even some employers.
Credit Scores By Age Group: How Are You Doing?
While there isn’t one road to building great credit, it might be helpful to know what the average credit score is for people your age. Given the amount of debt that you may have later in life, responsible credit use is likely to save you over $6,000 in interest charges alone.
Average Credit Scores by Age Bracket:
Age 40-50: The average credit score ranges between 648-657. By this age, most people have taken on many different types of debt, including mortgages and car loans.
Age 50-60: The credit average score ranges between 671-685. Many people see their credit peak in their early 50’s when they send their children off to college. Now is a great time to concentrate your spending to one or two cards that give you valuable perks, such as cash back for every dollar you spend or airline tickets and hotel stays.
Age 60+: The average credit score ranges between 699-728. By this age, most people are reasonably established financially and personally. As a result, credit may seem more readily available than ever. However, that doesn’t mean that you should borrow more than you can reasonably handle. Instead, focus on paying off any remaining debts so you can be prepared for living on a fixed income from pensions, savings, and Social Security.
How can I best improve and build my credit?
According to Experian, most scoring systems weigh payment history most heavily. A history of timely payments tells lenders that they can count on you to pay back your debts.
Weigh your balances to your credit limits to be sure that you aren’t using too much available credit. Credit Utilization is also an important factor that affects your score. Most scoring systems look to see a 10-30% ratio between balances and credit limits for the best scores.
When applying for a new line of credit, be sure to time your applications carefully. Every application you submit results in a hard inquiry on your credit report. This type of inquiry will lower your score temporarily; the inquiry can remain on your credit report for 12-24 months. With this in mind, you should research your likelihood of approval before applying for any new lines of credit. That way, you won’t risk needlessly hurting your score.
It is also possible to build your credit without a credit card
Some people are so debt averse that they prefer to avoid credit cards altogether. Although building credit without a credit card is tricky, it is definitely doable.
You don’t necessarily have to be in debt to create a credit history. Unfortunately, while paying your bills on time every month is an excellent habit, some providers might be unwilling to report your payments. You can still get credit for those payments by going through an alternate credit service, such as PRBC. This free service tracks your payments on rent, utilities, insurance, and various subscriptions to create an “alternate credit score” that shows that you’re responsible with your money
There is a catch, however: most lenders only consider a traditional credit score when handing out loans. However, according to PRBC itself, over 8,500 lenders in America will find their score useful.
You may also consider taking out a credit builder loan. This loan works similarly to layaway at your favorite store. Instead of putting money into an account initially and borrowing against that account, you make regular payments over time and get the money when the loan is paid off. Borrowing as little as $100 for 6 months can boost your score around 35 points, according to NerdWallet. While not all banks offer credit builder loans, Self Lender offers this type of loan online.
You may feel as though your glory days of good credit ended in your 20s, but that simply is not true. You can build credit at any point in your life, even after taking a devastating hit. Like they say, there’s no time like the present!