While multiple surveys in the past have reflected a dearth of financial skills among young people, a recent survey has revealed that teenagers are good at maintaining good credit scores.
Reported in The Guardian, recent data from Experian has claimed that compared to individuals in 20s, 30s and 40s, better credit scores are exhibited by individuals aged 18 and 19 years on the average. At the same time, people in the age range between 26 and 30 typically have the worst credit scores.
In general, the credit score of an individual is quite high when that individual is like a blank canvas financially. It then goes down a little and then some more until it begins to show an uptick when people are about 31 years old. This trend was established the study conducted by Experian which is amongst the largest credit reference agencies in the U.K. The study also concludes that around 55 years of age, individuals seem to have the highest credit score.
Credit score is critical for determining whether an individual is offered a great or bad financial deal. Take for example the case of a personal loan. An individual with the good credit score might be able to get such a loan for as low as 3% APR. However, if the credit score is not good, one might have to pay a rate which could be as high as 20% APR or more.
Varying systems are used b different credit reference agencies for calculating credit scores. For Experian, the “public-facing” credit score is measured on a scale ranging from 0 to 999. There are five broad bands for credit scores. Those between 0 and 560 are termed as very poor, between 561 and 720 as poor, between 721 and 880 as fair, between 881 and 960 as good and 961to 999 as excellent. 759 is the average score for its customer base which means a fair credit score
Above average score of 779 on the average was found for individuals in the 18 to 20 age group, the company said. 730 was the average credit score for individuals aged 26 to 30 while 74q was the score for people aged 21 to 25.730 was the lowest average score for the company’s customers.
After 31 years of age, the company noted a steady increase in the average credit score. A highest of 834 was found to be the average credit score for people over 55 years of age.
Experian’s James Jones says: “While 18- to 20-year-olds are less likely to be reliant on credit, many have access to a small amount of credit, such as a current account, a phone contract and a credit card, to have enough track record to get a higher score.”
He adds: “There is also a lower incidence of default or serious arrears, which peaks in the 26 to 30 category.”
According to the company, there are “a multitude of factors, including more opportunity to build a fuller and more mature credit history, increasing stability and, perhaps due to salary progression, a reducing day-to-day reliance on credit” for the steady increase in the credit score after 31 years.
(Adapted from TheGuardian.com)