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.

Share your thoughts.

Disclaimer: This data is based upon a sample of Credit Karma users and may not be indicative of national averages or trends.

As a homeowner, I get a lot of junk mail. In particular, I get lots of offers for 0% financing for major appliances and big ticket items. The Home Depot and Best Buy are probably the largest contributors.

On the surface 90-180 days of 0% APR sounds great. If you read our prior article, you could put the major purchase in a short term money market account and make 2-4% interest for the 90-180 days and get a small bonus for your purchase.

The problem is that most consumers don’t use this approach. They fail to read the fine print. Take a look at the excerpt from The Home Depot Credit Card disclosure below:

“No Interest. No finance charges will be imposed on this balance if you pay the amount of the balance in full within the promotional period. If you do not pay the balance in full prior to the expiration of the promotional period or if the promotional offer is otherwise terminated, finance charges on this balance will be imposed from the date of purchase until the balance is paid in full.”

This means that if you don’t pay the balance in full by the time the promo period ends, you will accrue interest from day one. This is often the rub of these type of offers. The truth is that a majority of the consumers will not pay off the balance in full within the 90-180 days. This leave the consumer paying 20-24.8% interest from day one.

From the retailer’s perspective, this is great. The consumers buys major appliances with a nice margin. Then the retailer get the consumer to pay for extremely high interest for months to come.

As a savvy consumer, you should always be aware of the fine print. As a rule of thumb, retail credit cards will have a higher APR than that of standard credit cards. I would recommend only using retail cards in two scenarios.

1. You understand the fine print and are taking advantage of the same as cash benefits. Sometimes these credit cards will get you another 10-20% off the initial purchase.
2. Retailer cards will have smaller limits and less stringent underwriting guidelines. This means if you have no credit history this may be a good place to start building one. With that said, plenty of major banks will give you a small credit line too if you are just starting to build a credit history.

Most times you will do better getting a 0% rate from a major issuer since their products don’t accrue from day one. There are some pitfalls with those offers too. I’ll discuss that next time.

Every time the Fed lowers short term interest rates there is a flood of questions asking: “Is it a good time to buy or refinance?”. For the majority of people who are looking at 30 fixed rate year loans, the answer is “No.”

Unlike credit cards, auto loans, and home equity lines of credit, Fed rate changes have little bearing on long terms rates which are more correlated to inflation and other macro level events.

(Note: Because of refinancing, the average life of a 30 year fixed rate mortgage is closer to 10 years. Therefore a 10 year treasury is often used to index a 30 year fixed rate mortgage. The fixed rate mortgage will always be higher than the 10 year treasury because there is inherently more risk in a mortgage than a US government backed security.)

Below is a correlation of the fed funds rates, the 10 year treasury, and the average 30 year fixed mortgage rate. Recently, there is a divergence between the 10 year treasury and the 30 year mortgage rates. While the 10 year treasury has gone down, mortgage rates have stayed flat or increased.  This is due to the recent problems in the sub-prime mortgage industry.

Hope this helps clarify a few things. You can check the latest mortgage rates on Credit Karma.

Lately I’ve heard a lot of people touting the idea of using 0% APR credit cards as a way to feed alternate high-yield savings plans. The concept itself is simple; you basically borrow money at no interest and put it into an account (or several accounts) that will earn you a decent interest rate- something, say, in the neighborhood of 3% - 6%.

The easiest way to do this is to your use your good or excellent credit to secure 0% APR credit cards that allow balance transfers or convenience checks. Lenders use this kind of offer all the time to increase balances on cards that they expect you to keep after the 0% grace period is up. Some of them will even offer bonuses for your first transfer to entice you that much more.

On the surface this seems like one of those loophole situations where you wonder “why didn’t I think of that?” because as long as you pay off the cards before the interest rate goes up you’ve effectively used one bank’s money to earn yourself interest at another bank. And the more 0% credit you can use, the more you can earn.

Many people claim to have made several thousand dollars a year with this method but, of course, no loophole is ever airtight. There are some inherent dangers:

1. Having multiple credit card inquiries will temporarily lower your credit score. This may be a problem if you are attempting to secure a loan, especially a home or auto loan.
2. Having high balances and using a high percentage of your overall revolving credit line will also lower your credit score.
3. If you miss just one payment on one of the credit cards you could be immediately repriced into a high APR. Upwards of 30%. This could severely jeopardize your overall return on investment if you cannot find another place to put that debt. See this article for an idea of what I’m talking about: “A Credit Card you Want to Toss“

To me, it’s just not worth the time, hassle, or detriment to my credit score for the extra dollars I’d be lucky to make. I’d have to apply for several cards, keep track of when the introductory 0% APR is over for each one of them, remember to make payments on all of them every month, and so on.

But hey, every person is different, and if you want to try it out more power to you. There are certainly plenty of offers out there for people with good credit. Both 0% APR credit cards and high-yield savings offers are available on Credit Karma. If you try it out, let me know how it goes.

Q: Seems like the home page offers and my offers are the same. Is there really any level of personalization in these offers?

A: Currently, a small percent of our offers are unique and custom. If our UI team is doing their job properly, it will be seamless to the user. With that said, we are currently in discussions with several large name brands that will be providing custom Karma Offers based on your credit profile. Our continued goal is to provide content, offers, and services that create value for our members.

Q: How is the credit score calculated? I can see by the inquiry that you’re using TransUnion, but my score differs from the one that TU provides.

A: The credit score formula is a proprietary algorithm unique to each score developer. We currently use a score created by TransUnion, with the underlying credit report data also provided by TransUnion. In your case, while the data source is the same, we are likely using a different scoring model.

We understand that this has caused some confusion for some of our users. We are in the process of developing a solution.

To learn more about scoring models, click here.

Q: I have recently went back to school to get a better education and I want to clean up my credit and live like a normal person and hold my head up.Where do I start? My score is a whopping 450 and I am in so much debt it scares me ($20,000.00)

A: Consistency and diligence are the most important aspects of improving your score. First, make sure your debt is at the lowest possible rate. Try to get a debt consolidation loan with a fixed monthly payment schedule that you can pay and plan against. If you are in school, look for school loans that are backed by the government for lower rates. Some loans even defer payment until you finish.

If you have a difficult time securing a consolidation loan then look for alternative sources such as person to person lending sites like Prosper, Lending Club, or Zopa.

Lastly, be patient. A good credit history takes years to create but only days to destroy.

Q: Was unable to sign up. Checked info and all match EX info. Suggestions, or phone number to resolve?

A: A majority of our failed credit score retrievals stem from fraud alerts set on the credit bureau file. To protect consumers, we purposefully do not show these scores. We are actively working on a solution with the bureaus to provide an alternative authentication process. We understand this can be frustrating to consumers currently looking for a score. However, consumer privacy and protection is our first priority.

Q: From a security perspective, how are you protecting your users data? Is it stored in your databases or is it using some sort of hosted-security model (like PassPack)?

A: Security was our first consideration when building our system and infrastructure. Here’s an overview of some of our security practices:

1. All sensitive data is encrypted during transmission, in accordance with industry standard best practices.
2. All sensitive data stored in our databases is encrypted.
3. All machines are firewalled and the appropriate measures have been taken to separate machines with sensitive information, particularly databases, from the Internet.
4. We do not store full SSNs . In the unlikely event of a breach of both our systems and encryption, an attacker would only access incomplete user information.
5. We do not require you transmit your full SSN to us more than once (on your first credit pull).
6. We have gone to great trouble to secure all parts of the application from unauthorized access via common web exploit patterns.
7. We are required to pass security audits by the credit bureau.
8. All of our servers are housed in a secure facility that is monitored around the clock, 365 days per year

Credit Karma was created to empower consumers by demystifying the credit landscape and providing consumers a unique way to benefit from that knowledge. Our service is free to consumers. No credit card is required and no strings are attached.

Our services are sponsored by our partners and advertisers who help pay for the credit scores. With that said, Credit Karma adheres to a very strict privacy policy . We will never sell your personally identifiable information, send spam, or share your information without your explicit consent.

The purpose of this blog is to share trends we are seeing in the credit and credit related industries. We hope to facilitate intelligent discussions, answer common questions, and provide articles that inform and educate.

Just by scanning some of the existing blogs and discussion forums, we can see there is enthusiasm, confusion, and skepticism about both Credit Karma and credit scores. We would like to start a dialog with our users via this blog to address their concerns. Please post any questions or comments in the comments section and we will attempt to address as many user questions as possible.

Thank you for your early support of Credit Karma. We have some really innovative and useful tools in the product roadmap.