Your credit score has a lot of influence over your finances. And you know that there are ways to build up your credit score: make payments on time, have a mixture of different credit types, keep debt down, apply for credit only when needed, and more. But are there certain things that you can’t control?
It is often hard for younger applicants to get approved for credit. Why is this? Does age influence your credit score?
Looking at Age Is Perfectly Legal
Lenders are entitled to look at age. However, no company should use age to discriminate against an applicant. State and federal laws on financial lending are crystal clear on credit scoring systems. It does not matter whether their company has hired FICO soft-wares and any other proprietary scoring system; the law allows credit scoring systems to consider the age of all applicants as long as they do not practice discrimination against the elderly.
Though Age Matters, Scoring Systems Do Not Consider It
Applicants are requested to write their date of birth along with their personal information. The law allows credit scoring systems to use age when calculating credit score for their applicants. However, the credit reports generated by credit companies have indicated that age is not used in the calculation. FICO’s credit scoring systems do not utilize or factor in age when calculating applicant’s score.
Age Is Important For Credit Score Maintenance
For applicants or credit card owners looking for ways to maintain their credit score solid, age becomes an integral factor. Even though credit scoring systems do not use age to calculate credit score, companies such as FICO have realized that older people are a better credit risk. For one, they have had a lot more time to build their credit history. The company realized that approximately 55% of clients over the age of 60 years recorded scores of above 750. If FICO’s statistic is anything to go by, aged people are better when it comes to credit taking and payment. They tend to make prompt payments for their credit cards better than the youthful counterparts. Credit card and installment loans reports indicate that young record more debts than older people. They end up getting lower credit scores. Companies find it easier to transact with the older lot because credit reports have produced high-credit scores and lower credit risk overtime. Simply put, many lenders will think twice when loaning out money to a client of a certain age bracket.
Factors That Credit Card Owners Use to Backup Age Influence
Cardholders may think that companies will look at their age and stop at that. A few habitual things can help shape their credit scores and lead to more appealing credit reports.
Proper Management of Credit Card Portfolio
Cardholders should make prompt payments. The age factor is not considered in isolation. FICO calculates credit score using payment history of the clients. So, as long as the user continues to have great payment history and avoid payment defaults, bankruptcies and foreclosures, the score will go up.
Age might initially work against their application, but a well maintained credit card portfolio can persuade lenders. It creates an impression that the applicant is credit worthy and most importantly that they have a responsibility to watch over the maintenance of their credit card score.
Therefore, all applicants should realize that they have no control over the age influence when it comes to calculation of their credit scores. All they can monitor is their habits related to credit card payment history and loan history. Age is out of control, and the credit scoring systems have the freedom to use it in the calculation. All that an applicant do is keep their credit card portfolio in order and pray that age bracket works to their advantage. Age influence is real, and they should come to terms with the bitter truth.
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