Maintaining a good credit score is important at any age, but depending on where you’re at in life, changing circumstances may affect the way you handle credit.
Here are some tips to maintain good credit during three major life stages:
Credit as a young adult
At this time, you may have a debit card or credit card, and you might even have student loans to manage. Your credit journey is only just beginning, so now is a great time to establish good habits.
The keys to achieving and maintaining a good credit score are pretty basic:
- Pay bills on time and in full
- Keep debt low
- Don’t max out your credit cards—in fact, try to keep spending below 30 percent of your credit limit
- Don’t close old credit cards, even if you don’t use them much
- Only apply for credit cards or loans that you need—this will help you avoid applying too often
Why all these rules? We’re glad you asked. Your credit score is based primarily on five factors:
- Payment history
- Amounts owed
- Credit utilization rate (the amount of credit you’re using compared to how much you have access to—the lower the rate, the better)
- Age of credit (the older, the better)
- Credit mix (how many different types of credit you’re managing)
When starting out with credit, it’s easy to make mistakes. If you’re able to take ownership of your financial future and avoid making common errors like taking out too many credit cards or falling into a late-payment habit, it’ll create a solid foundation for future success.
Remember, it doesn’t take much for your credit score to drop. A missed payment, closing out an old account or spending just a little bit more than you can afford can all have an impact. Restoring your score is hard and takes time.
Credit throughout your career
Time can do wonderful things for your credit. Perhaps this is why the average credit score tends to climb with older age groups.
You won’t get a credit boost for your 40th birthday, but here’s how maturity can help your credit:
- Increased length of credit history—responsibly managing credit for years is a good sign to future lenders
- Mistakes age off your credit report—most dings to your credit score are taken off after seven years
- Higher likelihood of having a greater credit mix
As you get older, your credit needs get more diverse. Lenders like to see that you can responsibly manage multiple types of credit, such as installment and revolving. When you’re younger, you’re likely to have a revolving credit account like a credit card, but installment loans are a bit more common with age. Managing a diverse (and more complex) mix of credit well can show that you’re a responsible borrower.
Student loans are one example of installment loans, as are mortgages, auto and personal loans. In 2018, more than one-third of homebuyers were millennials born between 1980 and 1998, and in 2021 over 80 percent of younger millennial buyers were purchasing their first homes, according to the National Association of Realtors.
Getting older and juggling more responsibilities can make maintaining a good credit score difficult. If you’re balancing personal expenses (like a mortgage) with family savings goals (like your children’s educations) with career costs (especially if you’re a business owner), it can be easy to get tangled in your monthly bills and due dates.
To stay on top of timely payments, keep a calendar or set alerts in your phone to remind you of payment deadlines. You may be able to set up automatic payments for certain bills, which can also prevent missed dates.
To keep your spending and credit card bills in line, create a budget and periodically review it. This way, you’ll be able to account for changing needs while keeping debt in check.
Credit in retirement
You made it through your working years and perhaps have already paid off your mortgage and auto loans. Now that you’re reaching your post-career years, you may wonder — is good credit all that important in retirement?
The answer is yes.
There may still come a time when you want to take out a loan. Maybe you would like to finance a boat and spend some time fishing? Other times, a mortgage could help aging parents move closer to their grown-up children. Some grandparents choose to help their grandkids out by cosigning a loan. No matter what changes come your way in retirement, maintaining your good credit score can help you achieve your goals without taking on high-interest debt.
Unfortunately, there’s a growing trend among seniors carrying debt into their golden years. The amount of debt that Americans age 50 to 80 carry increased 59 percent between 2003 and 2016.
Some of the best ways to maintain good credit as a senior are the same rules that have always applied, like paying bills on time and keeping debt low. For some retirees, it might be tempting to close out older cards they no longer use. This practice can lower the length of your credit history, which can be a negative mark on your credit.
Your life will change in many ways over the years, and your credit report will change along with you. Checking your credit report regularly and knowing how to maintain a good credit score can help you when you reach life’s big milestones, like your first home purchase or retirement.
When was the last time you checked your credit report? It’s important to check your credit frequently so that you can address issues and report any errors that you find. Need help reporting an error? Here’s our guide to fixing an error on your credit report.