Does age have an impact on credit scores? The short answer is yes. Data shows that different generations have distinct credit scores. Individual credit scores are used by financial institutions and lenders to determine eligibility for favorable rates and terms for financial products and services. For example, a higher credit score typically earns borrowers lower rates on personal loans.
In collaboration with Money Lion - These days, consumers have relatively easy access to their credit scores thanks to a wealth of online services. Knowing your credit score is important, because it sets expectations for the type of financial products (e.g., credit cards, loans) that you’ll be best suited to apply for, and it factors into other important life needs (e.g., finding a job, buying/renting a home).
Since its introduction in 1989, the FICO Score has reigned supreme as the most widely used credit scoring model in the US. The formula has gone through multiple iterations since, but if a consumer is applying for a loan or credit card, the financial institution on the other end is almost certainly using the applicant’s FICO score to help determine their creditworthiness.
Anytime a lender approves and ultimately funds a borrower, they are relying on a prediction that the borrower will pay them back in full. As a result, lenders are always trying to strengthen their “predictive power” when it comes to reviewing loan applications.
Establishing good credit behavior is beneficial for a consumer — doing so over a long period of time is all the more advantageous. As is common with many things in life, the longer you excel in something, the more proven a track record you will have built. That’s why the length of a consumer’s credit history is an important aspect in determining their creditworthiness to credit card companies, lenders, and any other party that would access a person’s credit report.
Credit scores can seem like a mystery, but they’re actually quite simple. When it comes to loans, any kind of borrowing involves a lender checking the applicant’s credit score. How the score affects a loan’s interest rate and terms depends on a number of factors. Below is a breakdown of the credit score spectrum and the advantages and disadvantages of different scores. Knowing where your score lies can help when seeking out a loan, to ensure you are getting the best offers available.
Most people, who know anything about personal finance, understand why a credit score is important. Far fewer people, however, know exactly what goes into determining a credit score. For the FICO score model, which the large majority of credit scores are based on, it’s best viewed as a pie chart of different categories.