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Credit Ratings:  Frequently Asked Questions

How does your age affect your credit score?

Is it possible for a younger person to have a high credit score, say above 720?  Yes, it is possible, but if you are under 29,  chances are high that your credit score is around 635, which is the average credit score for those between the ages of 18 and 29.

Even young people who pay their bills on time and don't accumulate too much debt tend to have lower credit scores because about 15% of one's credit score depends on the length of the credit history, meaning the time that one has been using credit.  Therefore, older people who have a credit history of twenty or more years, get a boost in their credit scores simply because they're older.

One of the three major credit reporting agencies released information in 2005 about the average credit score for various age groups.  These figures are as follows:

Age Group    Credit Score

  18 - 29           637
  30 - 39           654
  40 - 49           675
  50 - 59           697
  60 - 69           722
  70 plus          747

Length of credit history is just one variable that influences credit scores.  Paying your bills on time and not accumulating debt are much more important variables.

Will Credit Counseling Hurt My Credit Score?

Until very recently, the company that calculates your FICO credit score, Fair Isaacs,  included enrollment in credit counseling as a factor that lowered one's credit score.  However, their research told them that enrolling in credit counseling had no effect whatsoever on determining whether one was a good credit risk or not, so they removed credit counseling from consideration.  Therefore, the answer to the question, "will enrolling in credit counseling lower my credit score" is no, it will not.  A notation on your credit report that you are in credit counseling will not lower your FICO credit score.

However, that doesn't mean that credit counseling enrollment will not affect your ability to get loans and credit.  Some lenders see credit counseling enrollment as a good thing -- that you are taking steps to get out of debt and manage your finances.  Other lenders will see enrollment in credit counseling as an indication that you have too much debt and have mismanaged your finances.  In fact, some lenders, particularly mortgage lenders, will consider your enrollment in credit counseling to be equal to filing Chapter 13 bankruptcy, and although they might approve your loan, it will be at a substantially higher interest rate than those with good credit. If you are planning to apply for a mortgage loan in the near future, credit counseling might not be a good idea for you.            

Another problem with enrolling in credit counseling is that there are too many corrupt credit counseling agencies operating today that do a poor or lax job in sending in your payments on time, if at all.  Too many credit counseling agencies do not send in your payments to the creditor for you before the due date. If this happens, your credit score suffers tremendously as a result of late payment notations on your credit report.

Does Checking Your Credit Report Lower Your Credit Rating?

Checking your FICO credit score or pulling your own credit report does not hurt your credit rating.  The credit scoring system is set up so that inquiries made by a consumer checking his or her own credit score or credit report do not count in any way whatsoever towards lowering or raising one's credit score.

Credit inquiries made by credit card companies or mortgage lenders checking your credit report to send you pre-approved offers do not count either.  If they did, every American would have a very low credit score.

However, if you respond to those offers, and the credit card company or mortgage lender pulls your credit report to do a more thorough investigation, it does count.  It also counts every time you apply for any sort of financing, housing, insurance, employment, etc., and your credit report is pulled.  How much does it affect your credit score?  Each credit inquiry can lower your score by five points.

Five points for each credit inquiry sounds harsh, and it would be detrimental to someone who applied for many mortgage loans with many different mortgage lenders. However, the FICO scoring system counts multiple inquiries made in a 14-day period as just one inquiry, and all inquiries made within 30 days of the credit score being calculated are ignored.  Therefore, if you are shopping for a mortgage loan, you should do all of your applying with various lenders within the same week to protect your credit score.

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