Credit score is an essential part of your financial life, setting you up for success in the long-term. Whether you are a recent college graduate, starting your first job, or in your 40’s and a mid-career professional, credit score remains equally as important. While it’s extremely important to save money when you are first starting out, it’s also quite important to know how to spend money and understand the concepts behind your credit score and establishing good credit.
We read an interesting article that reported New Experian data that found consumers between the ages of 39 to 53 (aka Generation X) have a considerable gap in their credit scores when compared to older generations.
The credit bureau’s 2020 State of Credit report shows that Gen Xers, with an average credit score of 676, are closer to the scores of Gen Y/millennials (658) and Gen Z (654) than they are to Boomers (716) and the Silent Generation (729).
“Credit scores tend to improve as people age,” says Rod Griffin, senior director of public education and advocacy for Experian. But in order for Gen X consumers to reach the higher credit scores we see in older generations, they need to start focusing on two factors: lowering their credit utilization rate and paying their bills on time. Credit utilization can often be a confusing topic for many, but its important to keep in mind that if your utilization is too high, lenders may be worried you are relying on your credit card too much without being able to pay it off. If you need to charge large amounts on your credit card during a period of time, make sure to pay it off as quickly as possible to keep down your credit utilization.
While Gen X consumers have had fewer missed payments year over year, they still have a higher rate of missed payments than any other generation.
No matter your age, making your bill payments on time is key to maintaining good credit standing and an overall healthy financial future. In fact, payment history is the most important factor that determines your credit score. A solid score gives you access to the best credit cards and better loan terms when you want to take out a mortgage or a car loan.
It’s crucial to make sure you know how to track your debt payments and credit score every month. Consider using credit monitoring apps such as Credit Karma that update you with real time changes or sites such as AnnualCreditReport.com to see where your credit stands and ways to improve it. Your credit report will list the payment history on your current and historical credit accounts from the past seven to 10 years, including revolving (credit cards) and installment accounts (mortgages and loans).
If you have any questions about your credit score of explaining it to your children or grandchildren, we are happy to help. Please reach out to us with any questions at email@example.com or book a free 30-minute consultation here.