Like a Fine Wine, Credit Scores Get Better With Age

With age comes wisdom—not to mention higher credit scores.

That's the takeaway from Experian's latest State of Credit report. While the overall average VantageScore for Americans is 675, members of the Silent Generation (Americans born in 1946 or earlier) and Baby Boomers (born 1947-1966) rated well above, with average scores of 729 and 703, respectively.

Younger generations, meanwhile, have some catching up to do. Generation X members (born 1967-1981) averaged 658; Generation Y, also known as Millennials (born 1982-1995), averaged 638; while Generation Z (born after 1996) had scores averaging 634.

That said, younger Americans' lower scores can't necessarily be attributed to the fact that they are simply irresponsible with credit. The credit scoring game tends to reward older consumers, says Susan Henson, credit scoring expert at Experian.

"Older generations have the benefit of that long credit history, which counts for about 15% of your score in most credit scoring models," says Henson. "Also, many people in the Silent Generation tend to have very low credit utilization—15% versus the national average of 30%—so in general, they are not carrying a lot of credit card debt."

The phase of life you're in also plays a big role in where your credit scores stand, adds Rod Griffin, director of public education at Experian.

"As your credit history develops, your scores improve over time, in part just because of where you are in life," says Griffin. "Generation Z members are so young, they don't have much credit at all, or if they do, it's just a year or two old. Their scores haven't had time to grow yet."

Those consumers in the middle part of their lives, like Millennials and Gen X-ers, start making more money and are able to pay off student loans, which contributes to their growing scores. But they also typically use a lot more credit than their older counterparts.

"When you're buying a house and having kids, you are also paying for all of the stuff that comes with them. So you tend to have higher balances that lead to higher credit utilization rates," says Griffin. "Your scores in that stage of life are getting better, but they're also getting dragged down a bit because of the realities of life at that point." Indeed, Gen X-ers and Millennials have the highest levels of credit utilization, at 37% and 36%, respectively. (Credit utilization ratio is the amount of credit you use regularly in relation to how much you have available to you.) As expenses go down, typically so do balances, which is evident in Baby Boomers' lower average utilization of 28% and the Silent Generation's super low utilization of 15%.

Making payments on time plays a big role in achieving high credit scores, as well. Members of the Silent Generation average just 0.12 late payments a year, compared with the 0.55 for Millennials. And only 18% of the oldest Americans let their accounts become more than 90 days late, while the national average is double that, at 36%.

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