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Live Credit Smart – Generational Credit Trends Report From Experian

Have you ever wondered how different generations handle their finances? Experian, one of the largest credit agencies, took a look at the credit scores of millions of Americans of different age groups as well as what kind of debts they incurred.

They took a sampling of their VantageScores and issued a report entitled “Live Credit Smart – From Generation to Generation” indicating which generations have the best and worst credit. Their results are intriguing.

Learning From Experience

When I got my driver’s license, I resented the fact that teenagers had to pay more for car insurance than older drivers. Now that I have aged a bit, I have come to recognize the benefit of experience. Similar effects of age and experience also seem to be present when it comes to people’s credit scores.

According to Experian’s study, an American’s average credit score rises steadily with age. The mean VantageScore for all generations is 751, but Americans in Generation Y (ages 19-29) have the lowest average score of 672. The average rises to 718 in Generation X (ages 30-46), and to 782 among Baby Boomers (ages 47-65) before topping out at 829 among the Greatest Generation (ages 66 and up).

Although it is impossible for the youngest adults to have a credit history as long as older Americans, only some of the rise in credit scores across generations can be attributed to credit history length. In fact, the only explanation for these results is that Americans have more trouble with their credit at younger ages and, apparently, it takes a lifetime to get their finances in order.

Varying Levels of Debt

The study shows that age correlates closely with one’s credit score, but the same is not true when it comes to debt levels. While the average amount of debt for all age groups is $78,030, members of Generation Y actually have the lowest average levels of debt at about $34,000. Understandably, their debt is predominantly in the area of student loans, with auto loans coming in second.

Generation X leads the pack at over $111,000 worth of debt, 42% above the average American’s. These are people who are buying homes and starting families without necessarily making a dent in their existing student loans or other debts. Depressingly, the Baby Boomers average almost as much debt as the Gen X’ers, nearly $102,000. Unfortunately, it doesn’t seem like most people are able to make a serious dent in their debt levels until they reach retirement age. Thankfully, the average level of debt decreases to just over $38,000 after age 66. Nevertheless, these seniors actually fare 43% worse than average when it comes to incurring bank card debt.

What This Means for You

You already know how important it is to maintain good credit. And this report seems to only strengthen the case for getting your finances in order as soon as possible. While it is encouraging that each generation makes progress over the last, it is a daunting fact that it takes a lifetime before Americans, on average, have a good credit score. Those who are able to beat the odds and establish a strong credit history at an early age will see the fruits of their efforts over their lifetime. The reason is that those with the best credit scores consistently qualify for the lowest interest rates and the best terms. And there is no more important time to qualify for the best rates than the middle years of your life when your debt is likely to peak.

Good Credit Score

The trend is clear that retirees and recent graduates have the lowest debt, while it is people in their 30s, 40s, and 50s that find themselves leveraged to the greatest extent, not that there is necessarily anything wrong with that. These figures include debts like mortgages – and the purchase of a house is generally seen as a smart investment for young adults and families. The key is to be in position to save money on your mortgage by qualifying for the best rates. This fact comes into focus at times like this when mortgage rates are extremely low. Yet those with the greatest need to refinance their mortgage loan find it most difficult to do so.

Final Word

While older Americans have, on average, better credit scores than the younger generations, you don’t have to live your life by following the crowd. By recognizing the challenges faced by your generation, you can rise above your peers and secure your future by taking steps to manage your money better.

How does your credit score rank within your generation? Why do you think each age group stacked up the way it did?

credit generations infographic

Jason Steele is one of the nation's leading experts in credit cards and travel rewards since 2008. Jason is also the founder and producer of CardCon, which is The Conference for Credit Card Media. Jason lives in Denver, Colorado where he enjoys bicycling, snowboarding and piloting small airplanes.