It’s been more than 10 years since the Great Recession slammed Americans, and some people’s credit scores are doing better than others. For all age groups, the average 2018 score was 680, still five points down from the 2008 average. However, that only tells half the story.
A decade after the bottom fell out of the housing market, some people’s credit scores tanked and have not recovered since. Older people saw the sharpest credit score drops from 2008 to 2018, according to new data from Experian EXPGY, +0.47%
The average credit scores of consumers age 72 and above sank 40 points from 772 to 732, the credit bureau said. That was the largest decrease for any age group. The second-largest decrease was reserved for consumers ages 51 to 71; their scores fell from 723 to 706, a 17-point dip.
On a more positive note, 18- to 21-year-olds had the largest increase, a 23-point rise from 616 to 639, while 22- to 35-year-olds experienced a 15-point jump in their credit scores from 629 to 644. The 36- to 50-year-old demographic had a nine-point slip from 669 to 662.
Here's how the VantageScore works: For a score with a range between 300-850, a credit score of 700 or above is generally considered good, according to Experian. A score of 800 or above on the same range is considered to be excellent. Most credit scores fall between 600 and 750.
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Lori Trawinski, director of banking and finance at the AARP Public Policy Institute, said seniors have had “sharp increases in the amount of debt of all types.” Living costs outpacing retirees’ fixed income is one reason why their credit scores have not recovered, she said.
If one spouse dies, the surviving partner could still face the same housing costs with less income. An unexpected job loss before a planned retirement and/or a sudden, major illness were other cruel curves that could disrupt the finances of senior citizens, Trawinski said.
She is concerned about the financial stability of older Americans. For starters, they’re living longer and, those who are short on savings may be too frail to work. One recent study said 5.5 million senior citizens, or 7.7% of the senior population, could not afford all the food they needed in 2017.
People are living longer. Men in 2015 had a life expectancy of 76.3 years, up from 70 in 1980, according the Centers for Disease Control and Prevention. Women had a life expectancy of 81 years in 2015, up from 77 in 1980. “Many people find themselves unprepared,” Trawinski said.
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However, Kelley Motley, senior director of analytics at Experian, said there are technical reasons for the credit-score dip. Older Americans carried higher amounts of revolving debt on credit and retail cards and use fewer cards, so they’re drawing on those same lines of credit more often, she said.
Credit scores are based on factors like how often you use credit and the ratio of debt to available credit. Experian is one of the country’s three major credit bureaus, along with Equifax EFX, +0.55% and TransUnion TRU, -0.64% The Experian analysis was based on VantageScore numbers.
The 40-point drop “looks fairly dramatic,” Motley said, but also said perspective was important. After all, people over 72 have typically paid off all or the lion’s share of their mortgage. What’s more, a score of 700, even accounting for the 40-point drop, is still considered “good.”
Experian’s findings, on the whole, were encouraging, she added. Average national scores were rising for most Americans, she noted, signaling responsible debt management and steady incomes. Unemployment at a 49-year low of 3.6%, far below the recession high of 10% in October 2009.
People’s finances are also more robust. More people are saying they handle an unplanned $400 expense, the Federal Reserve said in separate research Thursday. Sixty-one percent of polled adults said they could now absorb the cost, up from one-half in 2013.
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