What’s a Good Credit Score in Your 20s (and Beyond)?

By Melanie Lockert
November 12, 2020

When you’re in your 20s, you’re just beginning your financial life.

This may mean getting your first big paycheck, applying for a new credit card, and managing your checking and savings accounts. Yet, another important aspect of your financial life in your 20s is building your credit and establishing a good credit score.

Your question now may be: What is a good credit score and why is this important? Read on to learn how a good credit score can help you when you’re in your 20s.

  1. What is a credit score?
  2. What is a good credit score?
  3. Average credit score by age
  4. Factors that affect credit scores
  5. Why is a good credit score important?
  6. How can you improve your credit score?
  7. Chime is here to help you build your credit
  8. Take responsibility for your credit score

What is a credit score?

A credit score is a three-digit number that represents how creditworthy you are. In other words, this number tells lenders how likely you are to repay your loans and if you’re a responsible borrower.

There are many different types of credit scores but the most popular is the FICO credit score. The FICO credit score range is from 300-850. The lower the score, the worse your credit is. If your credit score is high, your credit is in good shape.

What is a good credit score?

Now that we’ve reviewed credit score basics, your next question may be: What constitutes a good credit score? According to credit bureau Experian, a good credit score is 700 or above.

But if you’re in your 20s and just starting out, a score of 700 or higher may be tough as you’re just establishing your credit history. In fact, according to Credit Karma, the average credit score for 18-24 year-olds is 630 and the average credit score for 25-30 year-olds is 628.

FICO has different categorizations for credit scores and a 630 is deemed as “fair”. A “good” credit score based on FICO’s criteria is 670-739, a “very good” score is 740-799 and an “exceptional” score is 800-850.

So, given the fact that the average credit score for people in their 20s is 630 and a “good” credit score is typically around 700, it’s safe to say a good credit score in your 20s is in the high 600s or low 700s.

Keep in mind that when you’re in your 20s, you’re still establishing your credit history and your credit score takes into account the length of your credit history. Only time can help that part, so if you maintain good financial habits, the hope is that your score will elevate as you get older.

Average credit score by age

So, why do credit scores vary so much based on age groups? A lot of this has to do with what’s going on in the average person’s life. 

In your 20s, your credit age is still very young. This means your average credit age could be just a year or two old. Every time you take on a new credit card or debt while in your 20s, it can make a significant impact on your credit’s average age. Also, in your 20s you’re still in the process of building a credit profile from scratch. 

In your 30s, your credit ticks upward because you’ve had 10 years to establish a good payment history and average credit age. At this point, you’ve also likely established a better mixture of debts, including credit cards, car loans and maybe even a mortgage, which helps improve your credit. 

As you continue moving through the years, the average age of your credit continues to rise and the account mix improves. In your 40s through 50s, you are also in your prime earning years, so your income has likely improved significantly. This higher income can lead to higher credit limits, which lowers your utilization ratios and increases your credit score.

In your 60s, you’re nearing or already heading into retirement and reduced your debt in preparation for living on a fixed income. The law is also on your side, as the Equal Credit Opportunity Act may prohibit creditors from discouraging you from applying for credit due to age. In fact, the ECOA allows the credit scoring models to favor certain age groups, which happens to be those over 62 years old. 

To summarize, the average FICO credit score by age is as follows:

  • 20-29: 662
  • 30-39: 673
  • 40-49: 684
  • 50-59: 706
  • 60+: 749

Factors that affect credit scores

It is important to note that FICO scores do not take age into consideration, but they do regard the length of credit history. Even though younger people may be at a disadvantage, it is possible for people with short credit histories to get favorable scores depending on the rest of the credit report. Newer accounts, for example, will lower the average account age, which in turn could lower the credit score.

FICO likes to see established accounts. Young people with several years worth of credit accounts and no new accounts that would lower the average account age can score higher than young people with too many accounts, or those who have recently opened an account.

Five factors are included and weighted to calculate a person’s FICO credit score:

  • 35% of your score is based on payment history
  • 30% is based on your amounts owed
  • 15% is based on the length of your credit history
  • 10% is based on inquiries for new credit
  • 10% is based on the types of credit you’re using (i.e. loans and credit cards)

Why is a good credit score important?

Let’s be real, your credit score can seem pretty arbitrary. But it’s nonetheless important when it comes to getting your first apartment or applying for your first credit card.

Why is this? Because your credit score can make or break whether you get approved for an apartment. It can also determine whether you get approved or denied for a credit card. It can even affect the interest rate you get. This is crucial to understand because, if you take out a loan, interest can cost you a lot of money over time. Even the difference between a few percentage points can potentially cost you hundreds or thousands of dollars in interest.

So, having a good credit score can help you save money, and help you get better interest rates.

How can you improve your credit score?

What if you don’t have a good credit score quite yet? Or, perhaps you want to maintain your good credit and keep it in good standing?

There are a few simple rules to live by to boost your credit. Take a look:

  • The most important rule is to make all your payments on time. Your payment history determines 35 percent of your credit score, so it has the biggest impact.
  • The second rule of thumb is to make sure your credit utilization makes up 30 percent of your score – or less. Your credit utilization is how much of your total credit you use. Maxing out your cards each month can signal the alarms for lenders and make you look like a risk.
  • Lastly, try not to open too many new lines of credit. Opening too many lines of credit in a short period of time can look risky to lenders and lower your credit score.

Chime is here to help you build your credit

Another great way to build your credit is with Chime’s Credit Builder Credit Card. Chime’s Credit Builder is a no fee, 0% APR secured credit card that helps you build your credit. Each month, Chime reports payments to the major credit bureaus so everyday purchases like gas, groceries, bills, and subscriptions can all count towards your credit score. There are no fees, no credit check, and no minimum security deposit required to apply!

Take responsibility for your credit score

As you can see, taking action and being responsible in your 20s can help you build your credit over time. So, refer back to this guide and start improving your credit score now. And, just think: This will help you land that apartment, buy a new car, or get your first rewards credit card. Are you ready to improve your credit score in your 20s and start adulting?

Melanie Lockert is the founder of the blog and author of the book, Dear Debt. Her work has appeared on Business Insider, Time, Huffington Post and more. She is also the co-founder of the Lola Retreat, which helps bold women face their fears, own their dreams and figure out a plan to be in control of their finances.

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