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Average FICO score by age, and what it means for financial health

Average FICO score by age, and what it means for financial health

January 31, 2021

Average Fico Score

A credit score is a powerful piece of information, impacting both real estate agents and homebuyers.

Keep reading to learn more about what a FICO score is, how it relates to a credit score, average FICO score by age and the importance of these calculations in the real estate world.

What is a credit score? How does it relate to a FICO score?

A credit score is a number that quickly and easily represents an analysis of your credit report. It expresses how willing a financial institution or other lender is to work with a prospective borrower, based on how likely that borrower is to repay their debts. This concept is called creditworthiness.

A FICO score is a type of credit score. FICO, a data analytics venture previously known as Fair, Issac and Company, offers scoring models used to calculate a credit score. It is extremely common, used by businesses that offer credit to individuals and companies. However, it’s important to note that FICO is not the only business that produces credit scoring models. Other companies offer models for the same purpose.

And what about a credit report?

A credit report, which provides much of the information that goes into generating a credit score, comes from credit bureaus. Equifax, Experian and TransUnion are three leading credit bureaus in the U.S., all of which gather the information that goes into a credit report.

Why a credit score is important for real estate agents and their clients

For professionals in the real estate industry, and especially agents who operate their own businesses, a strong credit score can make it easier to secure some types of loans and financing.

If you operate your venture as a sole proprietorship or have to personally guarantee a loan for your organization structured as a limited liability company (LLC), for example, your credit score can have a major impact on lending decisions. It can even come into play when applying for a credit card, such as informing the credit limit set by the lender.

Good credit can make it easier to secure a loan — and the same is true for your clients.

A high credit score and generally positive credit report can have a major impact on homebuyers as well. Individuals and families seeking a mortgage loan will have their FICO score included as a significant part of the lending decision.

What’s included in your FICO score?

A FICO credit score includes analysis of these five elements of your credit history, which are each weighted to produce the final number:

● Payment history (35%): Represents on-time payments, or lack thereof.
● Amounts owed (30%): Represents use of available credit, like credit card debt. Using some available credit is a positive, using most or all of it is a negative.
● Length of credit history (15%): Represents various markers of how long you have had access to and used available credit.
● Credit mix (10%): Represents the mix of credit types in your name, like a term loan or credit card.
● New credit (10%): Represents how many new accounts you hold. Many recently opened accounts can bring a score down.

Average FICO score by age group

It might not be surprising to hear that the average FICO score can differ between age groups. What’s considered an average credit score for one group may be a good credit score for another.

Experian reported the average credit score for all people across the U.S. was 711 in 2020. The credit bureau further broke down the average credit score for five age groups for 2020:

1. Generation Z: 674.
2. Millennials: 680.
3. Generation X: 699.
4. Baby boomers: 736.
5. Silent generation: 758.

Building a good credit score takes time and benefits from experience and insight into responsibly applying for and using credit. With that in mind, it’s only logical that the average FICO score rises between each age group. Generation X, baby boomers and the silent generation have had more time to build a higher credit score, on average. Generation Z and millennials have a lower credit score than average in part due to the lack of these advantages.

Lending alternatives for real estate agents

This information can help you both plan your own business strategy and inform your clients about key facts related to a credit score.

Sometimes, seeking out a traditional loan or line of credit as a real estate agent can be too complicated or unlikely to succeed to be truly worthwhile. Just Commission Advance offers an alternative: commissions on pending sales. You won’t need to worry about having a good credit score or credit utilization — a contract for a pending sale, copy of your driver’s license and a few basic documents related to your standing as an agent are all that’s needed. Check out our FAQ page to learn more.