NEW YORK (MainStreet) — Audrey Oquendo hasn't used credit cards in years. The 66-year-old has excellent credit, but that's because she stopped debting in her 40s.
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"Using credit cards created a false sense of security that prevented me from living in reality," Oquendo told MainStreet. "So I cut them up and never looked back."
Although she sometimes has an urge to fill out the many credit card offers she receives in the mail, the former United Nations secretary resists.
"I get credit card offers all the time but I choose not to answer because it gets me in trouble," said the Manhattan resident.
Some 55% of people over the age of 60 have FICO scores at or above 750 compared to 27% of those less than 60 years old who have FICO scores below 700, according to FICO. That's because older people tend to not miss payments as often as younger people.
"Older people have older credit reports and they have less debt relative to the credit limits and original loan amounts," said John Ulzheimer, contributor with CreditSesame. "All of those things scream less risky."
In addition, younger borrowers have more debt on both credit cards and installment loans relative to their credit limits and original loan amounts. That higher "utilization" of credit equates to elevated credit risk and lower credit scores.
"Late payments can decrease your credit score, and it is more likely for a younger person to make a late payment than an elderly one," said Tim Kim, analyst with Francis Financial in New York.
"This in part is due to older people having more experience and a better understanding of the system and implications."
Within the credit system, age is only worth some 15% of score points, which is 50% more than the value of inquiries, and it's perfectly legal to consider a debtor's age, according to the Equal Credit Opportunity Act.
"As long as you don't discriminate against any protected classes like the elderly," Ulzheimer told MainStreet. "The insurance industry considers age when determining premiums. It's really no different. Certain age groups are riskier than others. That's a fact."
Age discrimination aside, the credit actions of certain age groups are clearly influential in scoring. "Younger people are on the front end of the consumer credit life cycle," said Ulzheimer. "That means they're actively accumulating debt in the form of credit cards, auto loans, mortgages and many of them are still paying off student loan debt. In some cases this debt takes decades to pay off."
Older people on other other hand have been there and done that and are toward the tail end of their credit life cycle. What younger debtors have to learn from their elders is earning more score points organically.
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"Younger people can make improvements by paying bills on time, keeping debt levels low and using their full legal name on documents to ensure they do not get mixed up," Kim told MainStreet. "The younger generation should take caution in owning multiple credit cards and should ensure they pay off the minimum each month."
—Written by Juliette Fairley for MainStreet