As a 20 something, I’ve been focusing on building credit only for a couple of years. I had what I consider “good credit” a few years ago, but with mounting credit card debt, a personal loan, an auto loan, and soon to be student loans, I know it’ll take some time before I’m deemed “credit worthy” again. For now, I’m focusing on getting out of debt before getting any more (i.e. a mortgage). Obviously, there’s several things that go into having good credit, and one of them has to do with the age of your credit. If I’m only 21, I clearly can’t have a long credit history, especially since I got my first credit card in 2008. But one of the credit bureaus, Experian, explains where different age groups when it comes to credit with a credit & generational infographic.
As you can see, my generation is just building our credit with student loan and car loan payments. The good thing is we as a group are under the average debt, while Generation X and Baby Boomers are above. That’s even with above average debt with retail cards (clothes to impress our friends) and auto loans (cars we can’t afford to drive). Our Vantage Scores suck though, earning us a D, but it looks like the scores get better with age.
I thought the infographic showed an interesting picture of where we are in our financial lives as far as credit and debt. I would love to be debt free, and plan to one day. It’s going to take a while, but I know I’m capable. Now that I know the potential downfalls according to age group, I know what to avoid.
Are you aligned with your generation on this infographic? How is your credit/debt?
This info-graphic is great!
I fall into Generation X (which is strange because in other texts I have
always fallen into Generation Y). Fortunately,
I am beating the average credit score, but have more debt as a result of a
mortgage and car. No credit card or
student loan debt to speak of.
I really think Generation Y will have it bad. Just like healthcare, I feel as though
student loans and the credit industry are really going to squeeze everything
they can out of consumers over the next few years. Not only will becoming debt free be a challenge,
but it will become a matter of survival.
You can still build a solid credit score with debt. The way a credit score works is that your:
Amount of credit
All go into a black box and out comes a credit score. Even with debt, AS LONG AS YOUR MAKE YOUR PAYMENTS, you’ll be ahead of the credit score game. This is because your repayment history weighs more than the other factors, though it’s not an exact science.
As long as you can: “I’ve never been late on a payment” You’re deemed a worthy customer.
To build you’re credit score, the first thing is to see your credit score and history from Experian, transition, and equifax to see if there are any discrepancies.
After that, I would focus on paying your smallest amount of debt first so that it reduces your credit utilization and maintains you a solid repayment history.
I believe that Obama made it harder for younger generations when he passed the new credit card laws making it harder to get credit cards. Credit cards if used properly can be a tool to build credit.
I hope this helps in building credit
That’s an incredibly informative graphic but not a complete picture. In fact, a credit score is not a complete picture of someone’s payment history – it only measures debt payments or reports missed payments. It is more likely that a credit score is used to disqualify you from a good rate than to get you the best rate.
Think about it: FICO is used by businesses, not consumers. We spend so much time worrying about our score and trying to “maximize our utilization”, and for what? A better rate on a loan for something we probably shouldn’t have bought because we didn’t have the money in the first place? (I know, I know, what about mortgages – but there are other options for that).
I stopped wasting time “building my credit” years ago and have instead worked on building our net worth. We save up for cars and kitchen remodels and vacations and unexpected emergencies and haven’t looked back to see how our credit score has suffered. It could be zero for all I care, and I hope more people will see the picture we are painting and stop playing Experian’s reindeer games.