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If you’re wondering what the average credit score is, you’re probably really wondering how your credit score compares to others. You may also be wondering if it’s good enough to get approved for a loan or a credit account. While the average credit score sounds like a simple enough figure to pin down, it’s a little more complicated than you may realize.
See, there are a lot of different credit scoring models out there. Most follow a range of 300 to 850, but there are some exceptions, and, even if ranges are similar, the scores each model generates based on what’s on someone’s credit report can vary as well. So, pinning down a true average credit score can be downright impossible, but there are some markers out there that can give you an idea of where it may fall.
For instance, according to Experian’s seventh annual State of Credit report, the nation’s average credit score was a 673 in 2016. That’s based on the VantageScore 3.0 model, which follows the 300 to 850 range. And the national average FICO score, which also follows a 300 to 850 range, hit 699 in April 2016, an all-time high.
How can you find out if you have an average credit score? Well, let’s break it down.
What’s My Score?
First things first. If you want to know how strong your credit is, you’ll need to know your credit score. You can find out by using Credit.com’s free credit report snapshot.
A credit score is calculated by using information that is contained in each of your credit reports from the three major credit bureaus: Equifax, Experian, and TransUnion.
Another thing you’ll need to know when comparing your number to others is which credit score model is being used to calculate the score, and what credit score range is being used. To reiterate, there are many different credit score models, including versions of VantageScore, FICO scores and even educational credit scores.
Some of these have different credit score ranges, so while VantageScore 3.0 and FICO scores run from 300 – 850, there are others that may run from 501-990 or 360–840, for example. You can generally find out what score’s in use by looking at the sheet or site on which the score is being supplied.
What’s a Good Score?
Again, different models have different ranges, and lenders make their own decisions about what they consider acceptable. The scores typically range from 301 to 850, with categories from bad to excellent. Here’s how the credit tiers generally break down:
- Excellent Credit: 750+
- Good Credit: 700-749
- Fair Credit: 650-699
- Poor Credit: 600-649
- Bad Credit: below 600
Ultimately, what’s considered a good or fair credit score will depend on how the lender views it, but you can get an idea of how lenders are likely to view your applications by checking your score and seeing how it compares to others.
Moreover, you can build good credit by focusing less on the numbers and more on what’s weighing them down. Most credit scores consider the same five major factors:
- Payment History
- Amount of Debt You Owe
- Length of Credit History
- A mix of Credit Accounts
- New Credit Inquiries
So, for instance, if you’re carrying a lot of debt, you may want to focus on paying some of your credit card balances down. If you’ve got a lot of credit inquiries on your credit report, you may want to hold off on applying for new credit for at least six months to a year.
And, of course, you can always improve an average credit score by making all payments on-time, keeping debts low and adding new accounts as you can handle them.
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Understanding Current Credit Trends
There are consumer trend tools available that track the originations for credit applications regarding mortgages, credit cards, and auto and student loans. By watching these tools and paying close attention to current credit trends, we can find ways to warn of potential problems that may exist in a particular market. We can also use this valuable information to further research how credit trends and credit issues are affecting consumers.
We are currently seeing a rise in credit card debt and interest rates as we progress through 2018 so it is important to focus on these credit scores to better understand what we can do to help improve our average credit score.
Going forward, if you tend to carry high balances on your credit card accounts, then you may actually find that it will cost you more per month to carry these higher balances because the minimum amount due may be raised to accommodate for this trend.
What Factors Play a Role in Our Average Credit Score?
When examining your credit score, several factors are in play. It is essential to understand what can potentially harm an average credit score and turn it into an inferior credit score.
Failure to repay your debt as you originally agreed to do can negatively impact your scores. From missed and late payments to charge-offs, collections, and settled accounts, you will find many things that can impact you if you are not careful.
Missed payments and late payments of thirty days or more are reported to each of the three major credit bureaus and can even remain on your credit report for up to seven years from the original date of delinquency.
A charge-off is when the lender decides that you will be unable to pay them the money that you owe, so they write the amount off as a loss. Many times these charge off accounts will then be sold to a collections office. Either way it happens, however, it will definitely leave a negative mark on your credit score, and even a collection can stay on your credit file for seven years.
Average Credit Score by Age
It has been shown that the average FICO score actually improves with age. If you are under the age of thirty, then your scores may be much lower than those of someone who is older.
Consumers in their thirties are also showing an average credit score lingering around the 620 mark because this age group is more likely to need credit for major expenses and other debt that they had begun to accumulate.
All these factors also play a role in the average credit of those between the ages of eighteen and twenty-one who are just beginning to build their credit. This age group is finding it harder and harder to gain any kind of credit initially at all.
Average Credit Score by Income
When you start analyzing the average credit score in relation to an individual’s income, you can see that the higher the income level, the higher their average score may be. Likewise, a lower income level may be indicative of a lower average credit score.
The biggest factor in play when it comes to an average credit score and income is the credit utilization. Credit utilization should always remain at under thirty percent to maintain a good average credit score.
Simple Ways to Improve Your Credit Score
If you are looking for simple ways to effectively improve a bad credit score, you should focus on paying your bills on time as agreed upon, maintain positive payment history with your lenders, pay down all your debt to help improve the credit utilization ratio, and only apply for a credit account when you really need it. Try to keep the hard inquiries on your credit files to a minimum. Too many can have a negative impact on your credit scores.