April 22nd, 2008
Relationship Between Age and Credit Scores
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If you have ever wondered if age affects credit scores, the answer is yes. Based on our data, we analyzed the relationship between age and average credit score for a sample of Credit Karma users. The relationship is quite clear that age is positively correlated to credit score. The older an individual, the higher their credit score on average.
In statistics, it is always important to recognize that correlation does not imply causality. In this case, age does cause changes in score. Most credit scoring algorithms take into account the length of your credit history and trade lines. The longer your trade lines are in good standing, the better your score. It therefore makes sense that younger people will have younger trade lines and therefore lower credit scores on average. The rationale is simple: the longer you have maintained a credit line in good standing, the higher demonstrated level of responsibility and therefore lower risk.
It is also import to note that younger people may have few accounts as well. The breadth of credit lines is another factor in score. This is not to say that someone 18-24 can’t have a high credit score. There are many factors affect your credit but on average a younger person will have a lower score.
The other plausible factor is that older people tend to be more responsible. For the same reason that drivers over 25 get a discount in their auto insurance, I suspect that older individuals tend be more responsible in their financial behavior and therefore would have higher scores as well. This is more a personal theory. Perhaps this can be the topic of future analysis based on our data.
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