The national credit score is between 670 to 689, which puts most Americans in the good credit bracket but not a very good one. Credit scores are a summary of the consumer’s credit quality and can influence various aspects of financial existence. Knowing where the average score lies as well as what is considered below, average, or above average brings about an understanding of one’s credit worth.
A credit score is a summary of the credit history, the amount you owe, and payment behaviors that determine the credit risk in the form of a three-digit figure. The possible scores are between 300 and 850. A higher number denotes a lower credit risk to the lenders while a low number denotes a high credit risk. FICO and VantageScore are the two most popular credit scoring systems that are being applied today. These two also similarly factor in your scores; your payment history, your outstanding balances, length of credit history, recent credit inquiries, and types of credit.
FICO and VantageScore classify credit scores using the following ranges:
800-850: Exceptional 740-799: Very Good 670-739: Good 580-669: Fair 300-579: Poor
Currently, the national credit score stands at 716 using the VantageScore Model and 695 using the FICO scores as of 2022. These averages are also higher than 688 and 686 in 2020, which suggests that overall the credit scores of Americans are gradually increasing. However, averages can hide differences in variability between subgroups of the population. As the analysis of scores by age, ethnic origin, education level, and geographical location shows, group differences are reflected in score distributions.
Secondly, young consumers have lower average credit scores than middle-aged consumers. Some of this gap can be explained by having a limited credit history. It also reveals that Asian as well as white customers get better average credit scores compared to black and Hispanic individuals in America. Geography is another differentiator. Minnesota, North Dakota, Vermont, and New Hampshire are among the states with the highest median credit scores. Even the Mississippi and Louisiana, two of the Southern states, have ranked comparatively low. While there are variations in credit scores by demography, the majority of the Americans in essence, fall under the lower ‘good’ credit range.
The same applies to what is considered an average or good credit score can also vary based on the goals in place. Credit scores could be grouped as bad, good, or excellent, but the way lenders like home or auto classify them could be different from how credit card classifies them. Credit score requirements also tend to increase in tandem with the former, thus it is with asset values. For instance, a 670 score is acceptable for an FHA home loan, while those who want jumbo mortgages are likely to require scores higher than 700. Even subprime auto lenders typically seek credit scores above 550. Therefore, the content plays a role when it comes to evaluating what an average or good credit score entails.
Now that you know where the average American's credit score falls, following are tips to maintain or boost your score: Now that you know where the average American's credit score falls, following are tips to maintain or boost your score:
Be sure to pay all of the bills on time. In general, payment history has a significant impact on scores. Create autopay or reminder alerts so the individual will not miss any payments and minimize the impact on their score.
Do not exceed the credit card limits. Outstanding balances play an important role within credit rating systems. Keep your credit utilization ratios below 30 percent of the available credit.
Avoid applying for new credit as this should only be done sparingly. New accounts can reduce the overall average account age which influences scores for a short period. Do not apply for many credit cards and use only the few that are necessary.
Check reports for errors. Such factors as closed accounts being displayed as open can bring wrong information that will affect the scores. Challenge major discrepancies with the credit bureaus.
Check your credit report regularly. It helps one track the score and correct negative impacts before they accumulate and become worse. Most of the cards and apps in the market now provide free tracking tools.
Consumers with fair credit can also obtain loans for larger purchases such as cars and homes. However, raising your score to the good or very good range increases approval and gets lower rates which can save a lot of interest in the long run. Check your credit score frequently and be more responsible in the use of credit to score high.
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