How Does Your Credit Score Compare to The Average Score?

Your credit is very important.  It can have an influence whether you get the job for which you have applied, if you will be approved for your mortgage or car loan, if you can rent the apartment you want and many other things.

The average credit score in the United States is 690.  The range for credit scores runs from the low of 300 to the top number which is 850.  You would think that averaging these two numbers the average score would be 575.  However, this is not the case.  As you can see the average score of 690 is significantly higher than 575.

Your credit score is also called your FICO score.  The Fico score started when the Fair Isaac Company in San Jose California, a data analytics company, devised a system designed to determine the credit worthiness of a borrower.  Most lenders use this system to decide whether or not to grant someone credit as well as the rate they will charge.  Usually, the higher your score, the lower the rate you will be charged.

Most people pay their bills on time each month.  However, other considerations enter the computation for a credit score.  If you apply for too much new credit this can have a negative impact on your score.  If you carry a high ratio of open credit to credit limit this, too, can negatively impact your score.  You can see below generally how your credit score is determined.

In the United States, there are three main credit rating bureaus.  They are TransUnion, Equifax and Experian.  If you check your score with all three bureaus on any given day you will probably find a small difference in your score with each bureau.  Your score is generally determined in this way:

35%     payment history

30%     amount of debt

15%     length of credit history

10%     amount of new credit

10%     types of credit

There are other things which can have an impact on credit scores.  When the economy is not doing well lenders may have more stringent rules concerning credit.  Most lenders do not disclose what score is needed to obtain the best rate.  If the economy is doing well you may qualify for a good rate with a score of 680 (10 points below average).  If the economy is bad you may need a score higher than the average to qualify for a good rate.  This may be because lenders are considering everyone at a higher risk when the economy is poor.  Although each lender has different criteria, in order to qualify for their best rate, you may need a credit score of 720 or higher.  Most lenders do not tell you what score you need to qualify for the best rate.

These are the ranges for credit scores:

300-579           poor, very risky

580-669           fair, below average

670-739           good, most people are in this range

740-799           very good, very dependable

800-850           exceptional

Lenders in various states will work with different numbers since each state has its own average credit score.  In the states of Iowa, Minnesota, New Hampshire, Massachusetts, Vermont, Montana, North Dakota and South Dakota 700 or higher is considered the average credit score.  States which consider lower scores such as 660 to 670 as average are Louisiana, Texas, West Virginia, Georgia, Michigan, Alabama, North Carolina, Nevada, New Mexico, Alaska and Arizona.

How good is your credit score?  How do you compare to the national averages?