What is the average American credit score?

Understanding your credit score is crucial for your financial well-being. It impacts your ability to get loans, secure favorable interest rates, and even rent an apartment. But what exactly is the average credit score in America, and how does yours compare? This comprehensive guide will delve into the latest statistics, explain the different credit scoring models, and provide actionable steps to improve your credit health.

Understanding Credit Scores

Before diving into the average, let's define what a credit score is. A credit score is a three-digit number that summarizes your creditworthiness. It's based on your credit history and is used by lenders to assess the risk of lending you money. The higher your score, the lower the risk you represent, and the better your chances of getting approved for credit with favorable terms.

Key Credit Scoring Models: FICO and VantageScore

Two primary credit scoring models dominate the market: FICO and VantageScore. While both aim to predict your creditworthiness, they use slightly different algorithms and data sources.

FICO Score

The FICO (Fair Isaac Corporation) score is the most widely used credit scoring model. Lenders often rely on FICO scores when making lending decisions. The FICO score ranges from 300 to 850, with higher scores indicating better creditworthiness.

FICO Score Ranges:

• Exceptional: 800-850
• Very Good: 740-799
• Good: 670-739
• Fair: 580-669
• Poor: 300-579

VantageScore

VantageScore is a credit scoring model developed jointly by the three major credit bureaus: Equifax, Experian, and TransUnion. VantageScore also ranges from 300 to 850 and uses a similar scale to FICO, making it easy to understand. However, the exact weighting of factors may differ from FICO.

VantageScore Ranges:

• Excellent: 750-850
• Good: 700-749
• Fair: 650-699
• Poor: 550-649
• Very Poor: 300-549

The Average American Credit Score: What the Data Shows

So, what is the average credit score in the United States? The answer varies depending on the source and the scoring model used. However, recent data indicates that the average FICO score is around 718, which falls into the "Good" range. The average VantageScore is also hovering around a similar mark, generally in the low 700s. These averages have seen slight fluctuations over the years, often influenced by economic conditions and changes in consumer behavior.

It's important to remember that this is just an average. Many Americans have credit scores significantly higher or lower than this number. Understanding the factors that influence your score is key to improving your financial standing.

Average Credit Scores by Age Group

Credit scores typically improve with age, as individuals have more time to build a positive credit history. Here's a general overview of average credit scores by age group:

• 18-29 Years Old: Average FICO score typically ranges from 660 to 680. This age group often has less established credit histories.
• 30-39 Years Old: Average FICO score generally falls between 670 and 700. Individuals in this age group are often building their credit through mortgages, auto loans, and credit cards.
• 40-49 Years Old: Average FICO score usually ranges from 700 to 720. This age group tends to have more established credit and may be working on paying down debt.
• 50-59 Years Old: Average FICO score commonly falls between 720 and 740. Individuals in this age group often have a long credit history and may have paid off significant debt.
• 60+ Years Old: Average FICO score generally ranges from 740 to 760 or higher. This age group typically has the most established credit and the highest average scores.

These are just general ranges, and individual credit scores can vary greatly within each age group.

Average Credit Scores by State

Average credit scores can also vary by state, influenced by factors such as employment rates, income levels, and financial literacy. While the differences are not drastic, some states consistently have higher average scores than others. For example, states in the upper Midwest and New England often have higher average scores compared to states in the South.

Factors Influencing Your Credit Score

Understanding the factors that influence your credit score is crucial for improving it. Both FICO and VantageScore consider similar factors, but the weighting of each may differ.

Key Factors:

• Payment History (35% of FICO score): This is the most important factor. Paying your bills on time, every time, is crucial for building a good credit score. Late payments, even by a few days, can negatively impact your score.
• Amounts Owed (30% of FICO score): This refers to the amount of debt you owe relative to your credit limits. Keeping your credit utilization (the amount of credit you're using compared to your total available credit) low is essential. Aim to keep your credit utilization below 30%, and ideally below 10%.
• Length of Credit History (15% of FICO score): A longer credit history generally indicates a more stable credit profile. The longer you've had credit accounts open and in good standing, the better it is for your score.
• Credit Mix (10% of FICO score): Having a mix of different types of credit accounts (e.g., credit cards, installment loans, mortgages) can demonstrate your ability to manage different types of debt.
• New Credit (10% of FICO score): Opening too many new credit accounts in a short period can negatively impact your score. Each credit application triggers a hard inquiry, which can lower your score slightly.

How to Improve Your Credit Score

Improving your credit score takes time and effort, but it's well worth the investment. Here are some actionable steps you can take:

1. Pay Your Bills on Time, Every Time: Set up automatic payments or reminders to ensure you never miss a due date.
2. Keep Your Credit Utilization Low: Aim to use less than 30% of your available credit. If possible, keep it below 10%.
3. Become an Authorized User: If you have a trusted friend or family member with good credit, ask if you can become an authorized user on their credit card. Their positive payment history can help boost your score.
4. Review Your Credit Reports Regularly: Check your credit reports from all three major credit bureaus (Equifax, Experian, and TransUnion) for errors and inaccuracies. You can get a free credit report from each bureau annually at AnnualCreditReport.com.
5. Dispute Errors on Your Credit Reports: If you find any errors, dispute them with the credit bureaus. They are legally obligated to investigate and correct any inaccuracies.
6. Don't Open Too Many New Credit Accounts: Avoid opening multiple credit accounts in a short period.
7. Consider a Secured Credit Card: If you have limited or poor credit, a secured credit card can be a good way to build credit. You'll need to provide a security deposit, which typically serves as your credit limit.
8. Pay Down Debt: Focus on paying down high-interest debt, such as credit card balances. This will improve your credit utilization and save you money on interest charges.

The Importance of a Good Credit Score

Having a good credit score can open doors to various financial opportunities and benefits:

• Lower Interest Rates: A good credit score can help you qualify for lower interest rates on loans, mortgages, and credit cards. This can save you thousands of dollars over the life of the loan.
• Better Credit Card Offers: With a good credit score, you can access credit cards with better rewards programs, perks, and lower fees.
• Easier Approval for Loans and Credit: A good credit score increases your chances of getting approved for loans and credit, whether it's for a car, a home, or a personal loan.
• Lower Insurance Premiums: In some states, insurance companies use credit scores to determine premiums. A good credit score can result in lower insurance costs.
• Renting an Apartment: Landlords often check credit scores to assess a tenant's reliability. A good credit score can make it easier to rent an apartment.
• Employment Opportunities: Some employers may check credit scores as part of the hiring process. A good credit score can demonstrate financial responsibility.

Conclusion

Understanding the average American credit score, the factors that influence your score, and how to improve it is essential for achieving your financial goals. While the average credit score provides a benchmark, it's important to focus on building and maintaining a strong credit profile that meets your individual needs and aspirations. By practicing responsible credit habits, regularly monitoring your credit reports, and taking proactive steps to address any issues, you can secure a brighter financial future.