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Poor credit rating sign
It can take a person until their 40s to achieve as good a credit rating as they had at 18. Photograph: Alamy
It can take a person until their 40s to achieve as good a credit rating as they had at 18. Photograph: Alamy

People in their late 20s have worse credit ratings than teenagers

This article is more than 6 years old

Figures from Experian show that people in their mid- to late 20s are the highest risks

Surveys have highlighted a worrying lack of money skills among young people, but when it comes to their credit scores, it seems teenagers are doing something right. New data from Experian shared exclusively with Guardian Money suggests that, on average, 18- and 19-year-olds have better credit scores than people in their 20s, 30s and 40s. Meanwhile, the typical age range at which your credit score is at its lowest ebb is 26 to 30.

The figures from Experian, one of the UK’s biggest credit reference agencies, show that on average, your credit score starts off quite high, when you are something of a financial blank canvas, then goes down a bit, and then goes down some more, before starting its upward ascent at about age 31. It then keeps climbing, reaching its high point at age 55-plus.

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Your credit score is one of the key bits of information that dictates whether you are offered a great or rubbish financial deal. For example, if you have a good score, you might today be able to get a personal loan for under 3% APR.

But if it your score isn’t so great, the same company might only be prepared to offer you a rate of 20%-plus APR, or it might simply turn you down.

Different credit reference agencies use different systems for credit score calculations. In the case of Experian, its “public-facing” score runs on a scale of 0 to 999, and there are five bands. These are very poor (0-560); poor (561-720); fair (721-880); good (881-960); and excellent (961-999).The average score among its customer base is 759 – that is fair.

The company says that for those in the 18 to 20 age group, the average score is an above-average 779. But for those aged 21 to 25, it’s 741, and it then drops again at age 26 to 30, reaching its low point of 730.

Then the average score starts climbing: for those aged 31 to 35 it’s 741, for those in the 36 to 40 age group it’s 755, and so on. The average score for those over 55 is an impressive 834.

Experian’s James Jones says: “While 18- to 20-year-olds are less likely to be reliant on credit, many have access to a small amount of credit, such as a current account, a phone contract and a credit card, to have enough track record to get a higher score.”

He adds: “There is also a lower incidence of default or serious arrears, which peaks in the 26 to 30 category.”

The average score rises from 31 years of age. This, says the agency, is due to “a multitude of factors, including more opportunity to build a fuller and more mature credit history, increasing stability and, perhaps due to salary progression, a reducing day-to-day reliance on credit”.

So what can you do to improve your credit history?

Being on the electoral roll is seen as a sign of stability by lenders, and is an easy way to confirm you are who you say you are and live where you say you live.

Build up a credit history. Contrary to what some might think, having few cards or loans can adversely affect your credit score, because you need to have a credit history – the argument being that lenders are looking for signs that you are capable of repaying money you have borrowed. But make sure the whole balance is paid off in full and on time.

Use your savings to pay off outstanding debt. Paying down any outstanding borrowing can give your credit score a boost and makes sense considering the relatively low rates on savings accounts right now compared to the cost of your borrowing.

Lenders like punctuality, as this shows that borrowers can successfully manage their financial commitments. Consider making all regular payments via direct debit so that they will always be on time.

Check your credit report and, if you spot any errors, demand that the credit reference agency fix them.

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