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What's the Average Credit Score and Is It Sufficient?


Sep. 11 2020, Updated 12:55 p.m. ET

If you think the hype surrounding your credit score is just overblown, you may want to think again. Credit scores are three-digit numbers used to determine whether your credit cards and loan requests will be approved or denied. If you want a car, a house, a loan, sometimes even an apartment to rent, you need to meet specific credit score requirements. 

You may be a reliable person, but lenders will turn you down if your credit score isn’t high enough. For this reason, you should know where your credit score falls compared to the national average. 

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What's the average credit score?

The average credit score is based on the credit and borrowing history of people across all age groups. Normally, older people have a higher credit score than younger people due to their extensive borrowing history.

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There are a variety of credit agencies that determine an average credit score using different factors. For example, VantageScore handles its demographics differently from FICO. VantageScore’s average is different from FICO’s average.

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The average credit score in 2019 was 706, according to FICO. In contrast, VantageScore placed the average at 682. The average credit score places most Americans within the fair to good credit range.

Credit scores fall into four categories:

  • Excellent: 720-850
  • Good: 690-719
  • Fair: 630-689
  • Poor: 629 or below

Is the average credit score sufficient for most people?

Having a good credit score guarantees that you will get better interest rates on loans and lower interest rates on credit cards. Since most Americans fall under fair to good, their credit should be able to support most of their lending endeavors. If your credit score is in the low range of fair, it’s tricky territory. Usually, you won't be eligible for larger loans and credit card limits. You should aim to be on the good side of the national average.

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How to improve your credit score

You can improve your credit score, but it does take time and being aware of what impacts your score. 

Your credit history determines about 15 percent of your credit score. The longer you keep an open line of credit, you will have a higher chance of getting a good credit score. You should aim for seven years.

Your payment history determines about 35 percent of your credit score. If you have made payments on time, you will be more likely to have a good credit score. Your credit score can take a big hit if you miss a payment.

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If you have a credit limit of $10,000 and you use only $1,000, you will be able to improve your credit faster compared to someone who uses 90 percent of their credit limit. Ideally, your credit utilization should be under 30 percent. 

It’s important to diversify your credit. Your credit mix makes up 10 percent of your credit score. You should include credit products like mortgage loans and credit cards.

If you have bills that were sent to a collection agency, you need to pay the bills. Usually, the debt collection agency can reverse the impact on your credit score. 

Also, keep your hard credit inquiries to a minimum. Requests for credit reports from lenders can decrease your score by 5 points to 10 points.

improving your credit score
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Improving your credit will pay off

Reaching the average credit score takes perseverance and patience, especially if your goal is to be on the higher end or above average. Use a free credit assessment tool like Credit Karma to see where everything falls. An assessment tool will start you off in the right direction to tackle a poor credit score or improve a decent credit score.  


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