Did you know the average FICO® Score in the U.S. hit 715 in 20231? This fact shows how vital it is to know your credit score today. Scores range from 300 to 850, and a score above 700 is seen as good. Most people’s scores are between 600 and 7501.
Your credit score is key in many financial areas. It affects your loan chances, apartment renting, and even job prospects. A strong score means better credit cards and loans with lower rates.
There are various credit scoring models, like FICO and VantageScore. FICO sees scores between 670 and 739 as good. VantageScore calls its good range 661 to 7801. Knowing these differences helps you understand your credit better.
Key Takeaways
- The average U.S. FICO® Score is 715
- Credit scores range from 300 to 850
- A score of 700+ is generally considered good
- Most consumers have scores between 600 and 750
- Different scoring models have varying definitions of “good” credit
- A good credit score can lead to better financial opportunities
What is a Credit Score?
A credit score is a key part of your financial life. It’s a number that shows how likely you are to pay back loans. This score comes from your credit history and report, which record how you handle borrowing and paying back.
Definition and Purpose
Your credit score acts like a financial report card. It’s a number from 300 to 850. Lenders use it to see if you’re a good candidate for loans or credit cards. A high score usually means you get better deals and lower interest rates.
Credit Score Ranges
Credit scores have different levels. For FICO scores, a good score is 670 to 739, and very good is 740 to 799. Scores above 800 are considered exceptional2. VantageScore has its own ranges, with 661 to 780 being prime and 781 to 850 superprime2.
| Score Range | FICO Category | VantageScore Category |
|---|---|---|
| 300-579 | Poor | Subprime |
| 580-669 | Fair | Near Prime |
| 670-739 | Good | Prime |
| 740-799 | Very Good | Prime |
| 800-850 | Exceptional | Superprime |
Importance in Financial Decisions
Your credit score is crucial for many financial choices. It affects getting loans, renting apartments, and even getting a job. A score of 690-719 can lead to better financial opportunities2. In the U.S., the average FICO score is 716, and it varies by age and income3.
Your credit score isn’t fixed. It can change with your financial habits. Paying bills on time, keeping credit card balances low, and being careful with new credit can help keep your score healthy4.
The Average Credit Score in the United States
Credit scores are key to financial opportunities for Americans. The FICO score, a common credit rating, shows the nation’s credit health. As of October 2023, the average FICO score was 717, a slight drop from before5.
This small drop was the first in ten years, ending a steady rise. From 2013 to 2023, scores went up by almost 30 points. This shows Americans are getting better at managing their credit6. The drop now is due to economic issues like higher interest rates and inflation.
Credit scores differ by age and state. The oldest Americans, the silent generation, have the highest scores at 760. Generation Z, the youngest, averages 6806. Minnesota has the best scores at 742, while Mississippi has the lowest at 6806.
| Generation | Average FICO Score |
|---|---|
| Silent Generation (77+) | 760 |
| Baby Boomers (58-76) | 745 |
| Generation X (42-57) | 709 |
| Millennials (26-41) | 690 |
| Generation Z (18-25) | 680 |
Recent changes in credit scores are due to more missed payments, higher debt, and changes in how people seek credit. By the end of 2023, credit card balances hit over $1 trillion. This shows many Americans are under financial strain5.
Knowing about these credit trends helps people make better financial choices. It can lead to improving their credit scores.
Major Credit Scoring Models: FICO vs. VantageScore
In the United States, two main credit scoring models stand out: FICO and VantageScore. These models are key in figuring out your credit rating and what’s in your credit report. Let’s look at each model and see how they differ.
FICO Score Overview
FICO has been around since 1956 and leads the credit scoring industry. It’s used by 90% of top lenders when they decide on loans78. Scores range from 300 to 850, with higher scores meaning you’re less of a risk to lenders9. The model looks at five main things: how you pay (35%), how much you use your credit (30%), how long you’ve had credit (15%), your credit mix (10%), and new credit (10%)9.
VantageScore Explained
VantageScore started in 2006 by the three big credit bureaus and is getting more popular8. Like FICO, it uses a 300-850 scale for its latest scores8. It checks six areas: how you pay, credit use, credit history length, credit mix, what you owe, and your available credit9. VantageScore can give a score with just one month of credit history, helping those new to credit7.
Key Differences Between Models
Both models aim to predict credit risk but have some key differences:
- FICO needs at least six months of credit history, while VantageScore can use just one month9.
- How they view inquiries differs: FICO looks at inquiries in a 45-day period, and VantageScore in 14 days9.
- Dealing with collections: FICO might ignore small collections under $100, but VantageScore includes all unpaid ones9.
| Feature | FICO | VantageScore |
|---|---|---|
| Score Range | 300-850 | 300-850 |
| Minimum Credit History | 6 months | 1 month |
| Inquiry Window | 45 days | 14 days |
| Market Share | 90% of lending decisions | Growing, less than FICO |
Knowing about these credit scoring models can help you manage your credit better and understand your credit report. Remember, different lenders might use different models, so it’s smart to ask which one they use when you apply for credit978.
Factors That Influence Your Credit Score
Your credit score is a key financial number. It’s shaped by several important factors. Knowing these can help you keep a good credit score and make smart money choices.
Payment history is the top factor, making up 35% of your FICO® Score and 40% of your VantageScore 3.01011. This shows how crucial it is to pay your bills on time.
Credit utilization is also big, counting for 30% of your FICO® Score and 20% of VantageScore 3.01011. Experts say to keep your credit use under 30% of your limit to stay in good shape11.
How long you’ve had credit matters too, affecting 15% of your FICO® Score1012. Long credit histories are good, so don’t close old accounts without thinking.
Credit mix and new credit inquiries each count for about 10% of your FICO® Score1012. Having a mix of credit types and being careful with new credit can boost your score.
| Factor | FICO® Score Impact | VantageScore 3.0 Impact |
|---|---|---|
| Payment History | 35% | 40% |
| Credit Utilization | 30% | 20% |
| Length of Credit History | 15% | Included in other factors |
| Credit Mix | 10% | Included in other factors |
| New Credit Inquiries | 10% | Included in other factors |
By focusing on payment history and credit utilization, you can improve your credit score and financial health.
Payment History: The Most Critical Factor
Your payment history is key to your credit score. It makes up 35% of your FICO® Score, which is the biggest part of what lenders look at1314. This shows how important it is to pay on time.
Impact of On-Time Payments
Always paying on time helps build a good credit history. It shows you’re reliable to lenders. Now, paying bills like phone, utility, and streaming services can even help your credit score with Experian Boost®14.
Consequences of Late Payments
Being late with payments can really hurt your credit score. Just one late payment can lower it by up to 180 points15. These late payments can stay on your report for up to seven years, making it hard to get loans or good interest rates1315. Lenders usually report payments over 30 days late to the big three credit agencies15.
Strategies for Maintaining a Positive Payment History
Here are ways to keep a good payment history:
- Use automatic payments to never miss a bill
- Catch up on missed payments quickly
- Get help from creditors or credit counseling if you’re having trouble
- Think about a debt consolidation loan to make payments easier1315
Late payments can hurt your credit score, but the damage lessens over time. By always paying on time, you can slowly get your credit back on track and improve your financial health15.
Credit Utilization: Balancing Your Credit Usage
Credit utilization is key to your credit rating. It makes up 30% of your credit score, right after payment history16. This ratio is how much of your available credit you’re using across all cards.
Experts say to keep your credit utilization under 30% for a good score1617. As of Q3 2022, Americans used an average of 28% of their credit17. High scores often mean using just a tiny part of your credit17.
Your credit report shows your credit utilization, affecting your score fast. Lowering it can boost your score in just 30 days18. Surprisingly, a 0% rate is actually bad for your score, not good17.
Strategies to Improve Credit Utilization
Here are ways to better your credit utilization ratio:
- Pay off existing balances
- Use balance transfer credit cards
- Request credit limit increases
- Apply for new credit cards16
Both your total and highest utilization rates affect your scores17. Using many credit cards can help, but use them wisely.
| FICO® Score Range | Average Credit Utilization |
|---|---|
| 300-579 (Poor) | 72% |
| 580-669 (Fair) | 45% |
| 670-739 (Good) | 30% |
| 740-799 (Very Good) | 15% |
| 800-850 (Exceptional) | 5% |
Understanding and managing your credit utilization can greatly improve your credit health and financial stability.
Length of Credit History: Building Long-Term Credit
Your credit history is key to showing you’re trustworthy with credit. It makes up 15% of your FICO score and about 20% of your VantageScore. This makes it a big part of your credit score19.
Importance of Account Age
The length of your credit history is the average age of all your credit accounts. Having credit accounts for a long time usually means a higher credit score. People with the best scores often have credit accounts that are 30 years old19.
Having a good credit score of 700 means your credit history adds over 100 points to your score19. This shows how important it is to take care of your credit over time.
Tips for Establishing Credit History
Building a good credit history takes time and patience. If you’re new to credit, you might not see a score until an account is six months old19. Here are ways to start and improve your credit history:
- Open a student or secured credit card and use it wisely
- Think about a credit builder loan to add to your credit mix
- Become an authorized user on a family member’s long-standing account
- Keep old accounts open, even if you don’t use them often
- Avoid opening too many new accounts in a short time
While building credit history is key, payment history and credit use have an even bigger effect on your score20. Paying bills on time and keeping your credit use low helps you keep a good score as you build your credit21.
Credit Mix: Diversifying Your Credit Portfolio
Your credit mix is key to your credit rating. It makes up 10% of your FICO® Score, which is a big deal for managing your money2223.
A good credit mix has both revolving and installment credit types23. Revolving credit includes credit cards and home equity lines. Installment credit covers things like mortgage and auto loans22.
Your credit report breaks these down into four types: installment loans, revolving debt, mortgage accounts, and open accounts24. Each type has its own role in your financial life. Installment loans have set payments, while revolving debt lets you borrow up to a limit with flexible payments24.
To get a better credit mix, keep at least one revolving and one installment credit account22. This mix can grow as you get new credit. But, payday loans and similar options don’t count towards your credit mix22.
It’s good to diversify your credit, but don’t apply for too many credits. This can hurt your score22. Stick to managing what you have and slowly add more credit when needed.
By knowing and managing your credit mix well, you can lift your credit rating and better your financial health.
New Credit Inquiries: Managing Credit Applications
It’s important to know how credit inquiries affect your credit history. They make up 10% of your FICO score, which is a big deal for your creditworthiness25.
There are two kinds of credit inquiries: hard and soft. Hard inquiries happen when you apply for new credit and can lower your score by up to 10 points. But, most people see a drop of less than 5 points25. Soft inquiries, like checking your own credit score, don’t affect your credit at all2625.
Hard inquiries stay on your credit report for two years but only affect your FICO score for the last 12 months2527. If you apply for the same type of credit several times in a short period, like shopping for mortgages or auto loans, it’s usually counted as one inquiry25.
To lessen the effect of credit inquiries on your score:
- Space out credit card applications by at least 90 days25
- Use prequalification offers that involve soft inquiries26
- Avoid opening multiple new accounts in a short timeframe27
New credit can lower your score at first, but it can also help build a diverse credit mix and a positive payment history over time27. Make sure to balance your need for new credit with its effect on your score for smart financial choices.
Industry-Specific Credit Scores: Auto and Bankcard Scores
Credit scores aren’t the same for everyone. Lenders use special FICO scores for auto loans and credit cards. These scores help them understand the risk better for certain credit products.
Understanding Auto Scores
FICO Auto Scores predict the chance of default on car loans. They range from 250 to 900, with higher scores meaning lower risk2829. Auto lenders often use FICO Auto Scores 2, 4, 5, 8, and 9 to check loan applications29.
Bankcard Scores Explained
FICO Bankcard Scores also go from 250 to 9002829. They aim to predict the risk of not paying back credit card debt30. Credit card companies often look at FICO Bankcard Scores 2, 4, 5, 8, and 9, and FICO Score 3, for applications29.
How They Differ from Generic Scores
Unlike the general FICO scores, these industry scores have a wider range29. They look at different factors than regular scores. For instance, auto scores focus more on car loan history, while bankcard scores look at how you use credit cards.
| Score Type | Range | Focus |
|---|---|---|
| Generic FICO Score | 300-850 | Overall creditworthiness |
| FICO Auto Score | 250-900 | Car loan default risk |
| FICO Bankcard Score | 250-900 | Credit card default risk |
Lenders might use different versions of these scores. The FICO Score 10 suite, including FICO Auto Score 10 and FICO Bankcard Score 10, is the latest29. These new versions give a clearer picture of credit risk28.
Improving Your Credit Score: Practical Strategies
Boosting your credit score can save you thousands of dollars over time. A good score is between 670 and 850, with 850 being perfect31. By focusing on key areas, you can see significant improvements in your credit rating.
Payment history is the most crucial factor, making up 35% of your FICO score31. Always pay your bills on time to keep a positive credit history. If you have a thin credit file, consider becoming an authorized user or getting a secured credit card to start building credit32.
Credit utilization is also very important. Keep your credit card balances under 30% of your limits3132. You can improve this by paying down debt or asking for a credit limit increase. Strategic balance payments can significantly impact your score.
Keep a diverse credit mix and limit new credit applications. Hard inquiries can affect your score for up to two years31. Keep old accounts open to preserve your credit history length32.
Regularly check your credit reports for errors. Disputing inaccuracies can lead to quick score improvements33. Consider using rent-reporting services or Experian Boost to add positive payment history from utilities and streaming services.
| Strategy | Potential Impact | Time Frame |
|---|---|---|
| Pay bills on time | High | 6-12 months |
| Reduce credit utilization | Medium to High | 1-3 months |
| Dispute errors | Varies | 30-90 days |
| Become authorized user | Medium | 1-2 months |
By using these strategies, you can potentially see a 100-point increase in your credit score, especially if you’re starting from a lower range33. Remember, building good credit takes time and consistent effort.
Monitoring Your Credit: Tools and Resources
It’s key to keep an eye on your credit report and rating for good financial health. Let’s look at some great tools and resources to help you stay updated on your credit status.
Free Credit Report Options
You can get one free credit report each year from Equifax®, Experian®, and TransUnion® at AnnualCreditReport.com3435. This lets you check your credit info for free. Equifax gives you six free credit reports a year and a monthly VantageScore® 3.0 credit score34.
Credit Monitoring Services
For detailed tracking, think about credit monitoring services. Experian CreditWorks Premium costs $24.99 a month. It gives you scores from all three big bureaus and a FICO® Score simulator36. Plus, it has identity theft protection and watches the dark web36.
For a free choice, Experian CreditWorks Basic keeps an eye on your Experian credit report, tracks your score, and alerts you to changes36. Did you know 90% of top lenders use the FICO® Score? It’s a key score to watch36.
Understanding Credit Score Fluctuations
Credit scores change based on different models and when they’re checked3435. Keeping an eye on them helps you see how your actions affect your score. Checking your score through services like CreditWise won’t hurt your credit, as it’s a soft inquiry35.
By being alert with these tools, you can catch identity theft, understand your finances, and work on improving your credit health. Learn more about effective credit monitoring to better your financial health35.
Conclusion
Knowing your average credit score is key to good financial health. As of October 2023, the FICO 8 score averages 717, and the VantageScore 3.0 is 700. This means many Americans have a “good” credit score3738. These scores are crucial for getting loans and low interest rates.
To keep or better your credit score, pay attention to payment history and how much credit you use. Making payments on time is very important, making up 35% of your FICO score39. Also, try to use less than 30% of your credit to keep your score healthy37.
Your credit score can change for the better with good habits. Check your credit report often to spot mistakes or fraud early. With effort and smart credit use, you could aim for the top FICO score of 850, like 1.7% of Americans do37.
FAQ
What is a credit score?
A credit score is a number between 300 and 850. It shows how likely you are to pay back money you borrow. Credit scores help decide if you get loans, what interest rates you get, and even if you can rent an apartment.
What is the average credit score in the United States?
As of October 2023, the average FICO 8 score in the U.S. was 717. This is one point higher than the year before. The VantageScore 3.0 average was 700, six points up from last year. These scores mean most Americans have “good” credit.
What are the major credit scoring models?
FICO and VantageScore are the main credit scoring models. They use a 300-850 scale for scores. FICO needs at least six months of credit history. VantageScore can use just one month of history. FICO is used by 90% of top lenders, while VantageScore is common in credit monitoring services.
What factors influence credit scores?
Important factors include payment history (35% for FICO), how much credit you use (30% for FICO), how long you’ve had credit, the mix of your credit, and new credit inquiries (10%). VantageScore also looks at these but weighs them differently.
How important is payment history for credit scores?
Payment history is key, making up 35% of a FICO score. On-time payments help scores, while late payments can hurt for up to seven years. Making payments on time is key for good credit scores.
What is credit utilization and how does it affect credit scores?
Credit utilization is how much credit you’re using compared to what you have. It’s the second biggest factor in scoring. Lower usage is better. Experts suggest keeping it under 30%. Paying down debt and raising your credit limits can help.
How does length of credit history impact credit scores?
Length of credit history is 15% of a FICO score. It looks at your oldest account’s age, the average age of all accounts, and how long different account types have been open. Longer histories usually mean higher scores. Keeping old accounts open and avoiding new ones helps.
What is credit mix and why is it important?
Credit mix is 10% of a FICO score. It’s the variety of credit types in your report. A mix of revolving and installment loans can boost scores. But, don’t take on debt just for the mix.
How do new credit inquiries affect credit scores?
New inquiries make up 10% of a FICO score. Hard inquiries from applying for credit can lower scores. Many inquiries in a short time can hit harder. But, shopping for certain loans in a short period is usually counted as one inquiry.
What are industry-specific credit scores?
FICO has scores for auto lenders and credit card companies. These scores range from 250 to 900, unlike the standard 300-850. They’re made for specific types of credit and might weigh factors differently. Auto scores look more at auto loan history, while bankcard scores focus on credit card use.
How can I improve my credit score?
Improve your score by paying bills on time, keeping credit card balances low, and keeping old cards open. Also, have a mix of credit types and limit new applications. Check your credit reports for errors and dispute them. Experian Boost can add positive payment history from utilities and streaming services to your score.
How can I monitor my credit score?
Get free credit reports once a year from AnnualCreditReport.com. Many credit card companies and financial websites offer free score monitoring. Paid services give more detailed tracking and identity theft protection. Scores change often due to new information, so watch trends over time.
Source Links
- What Is a Good Credit Score? – Experian – https://www.experian.com/blogs/ask-experian/credit-education/score-basics/what-is-a-good-credit-score/
- What Is the Average Credit Score by Age? – NerdWallet – https://www.nerdwallet.com/article/finance/what-is-the-average-credit-score-by-age-and-what-is-a-good-score-for-my-age
- What Is The Average Credit Score? | Bankrate – https://www.bankrate.com/personal-finance/credit/average-credit-score-and-how-to-improve/
- Here is the average credit score at every age in the U.S.—see how yours stacks up – https://www.cnbc.com/2024/04/27/average-credit-score-at-every-age-in-the-us.html
- Average U.S. FICO Score at 717 as More Consumers Face Financial Headwinds – https://www.fico.com/blogs/average-us-fico-score-717-more-consumers-face-financial-headwinds
- The Average Credit Score by Age, State, and Year – https://www.businessinsider.com/personal-finance/average-credit-score
- FICO Vs. VantageScore Credit Scores: What’s The Difference? – https://www.forbes.com/advisor/credit-score/fico-vs-vantagescore-credit-scores-whats-the-difference/
- The Difference Between VantageScore® Scores and FICO® Scores – https://www.experian.com/blogs/ask-experian/the-difference-between-vantage-scores-and-fico-scores/
- Articles – https://www.equifax.com/personal/education/credit/score/articles/-/learn/difference-between-fico-scores-vantagescore/
- What Affects Your Credit Scores? – Experian – Experian – https://www.experian.com/blogs/ask-experian/credit-education/score-basics/what-affects-your-credit-scores/
- What Factors Affect Your Credit Scores? – NerdWallet – https://www.nerdwallet.com/article/finance/what-makes-up-credit-score
- The 5 Factors that Make Up Your Credit Score – https://myhome.freddiemac.com/blog/financial-education/20210831-factors-credit-score
- How Payment History Impacts Your Credit Score | myFICO – https://www.myfico.com/credit-education/credit-scores/payment-history
- What’s the Most Important Factor of Your Credit Score? – https://www.experian.com/blogs/ask-experian/what-factor-has-the-biggest-impact-on-credit-score/
- Focus On Payment History—It’s The Most Important Credit Factor – https://www.forbes.com/advisor/credit-score/payment-history/
- Everything You Need To Know About Credit Utilization Ratio | Bankrate – https://www.bankrate.com/credit-cards/advice/credit-utilization-ratio/
- What Is a Credit Utilization Rate? – Experian – https://www.experian.com/blogs/ask-experian/credit-education/score-basics/credit-utilization-rate/
- How Long Will a High Credit Card Utilization Hurt My Credit Score? – Experian – https://www.experian.com/blogs/ask-experian/how-long-will-high-credit-utilization-hurt-credit-score/
- How Length of Credit History Affects Your Score | Bankrate – https://www.bankrate.com/personal-finance/credit/length-of-credit-history-credit-score/
- Length of Credit History Affects Credit Scores – NerdWallet – https://www.nerdwallet.com/article/finance/credit-age-length-of-credit-history
- Length of Credit History: An In-Detail Guide – https://www.creditstrong.com/length-of-credit-history/
- What Is Credit Mix? – Experian – https://www.experian.com/blogs/ask-experian/what-is-credit-mix-and-how-can-it-help-your-credit-score/
- How to get a good credit mix and boost your credit score – https://www.cnbc.com/select/how-to-get-a-good-credit-mix/
- Articles – https://www.equifax.com/personal/education/credit/score/articles/-/learn/what-is-a-credit-mix/
- How Credit Inquiries Affect Your Credit Score | Bankrate – https://www.bankrate.com/credit-cards/advice/how-credit-inquiries-affect-credit-score/
- How Multiple Credit Applications Affect Your Credit Score – Experian – https://www.experian.com/blogs/ask-experian/how-multiple-credit-applications-affect-your-credit-score/
- How New Credit Impacts Your Credit Score | myFICO – https://www.myfico.com/credit-education/credit-scores/new-credit
- FICO Score 8 and Why There Are Multiple Versions of FICO Scores| myFICO – https://www.myfico.com/credit-education/credit-scores/fico-score-versions
- What Do The Different Versions Of FICO Scores Mean? | Bankrate – https://www.bankrate.com/personal-finance/credit/different-fico-score-versions/
- What are the Different Credit Score Ranges? – https://www.experian.com/blogs/ask-experian/infographic-what-are-the-different-scoring-ranges/
- How to Improve Your Credit Score Fast – https://www.investopedia.com/how-to-improve-your-credit-score-4590097
- Articles – https://www.equifax.com/personal/education/credit/score/articles/-/learn/how-to-improve-credit-score/
- How to Build Credit Fast – NerdWallet – https://www.nerdwallet.com/article/finance/raise-credit-score-fast
- Articles – https://www.equifax.com/personal/education/credit/score/articles/-/learn/how-to-check-credit-score/
- How to Check Credit Scores & Reports for Free | Capital One – https://www.capitalone.com/learn-grow/money-management/monitor-your-credit/
- How Credit Monitoring Can Help You Increase Your Credit Score – Experian – https://www.experian.com/blogs/ask-experian/how-credit-monitoring-can-help-increase-your-credit-score/
- What Is a Good Credit Score? – NerdWallet – https://www.nerdwallet.com/article/finance/what-is-a-good-credit-score
- What Is the Average Credit Score? – NerdWallet – https://www.nerdwallet.com/article/finance/what-is-the-average-credit-score
- Will Closing a Credit Card Hurt Your Credit? – Experian – https://www.experian.com/blogs/ask-experian/will-closing-a-credit-card-hurt-your-credit/