Credit scores are numerical representations of a person’s creditworthiness. They are calculated based on information in a person’s credit report and can range from 300 to 850. Higher scores indicate better credit and lower risk to lenders. Credit scores are used by lenders to help make decisions about whether to approve financing for credit cards, loans, mortgages, and other types of credit. Understanding the range of credit scores and what is considered good or bad credit can help consumers better manage their finances.
What is a good credit score?
In general, credit scores above 700 are considered good, and anything below 670 is viewed as poor. However, the thresholds vary slightly depending on the type of credit score used. The FICO score and VantageScore are two of the most common credit scoring models.
For FICO scores:
- 800-850 is exceptional
- 740-799 is very good
- 670-739 is good
- 580-669 is fair
- 300-579 is very poor
For VantageScores:
- 781-850 is excellent
- 661-780 is good
- 601-660 is fair
- 500-600 is poor
- 300-499 is very poor
In general, a credit score above 700 for both models is considered good and will qualify for the best interest rates from lenders. Scores lower than 640 will likely result in higher borrowing costs or difficulty getting approved for financing.
What is the average credit score in America?
According to Experian data, the average FICO credit score in America as of 2022 is 714. This is slightly higher than the average of 710 reported in previous years. The average VantageScore credit score is around 682. Here is a breakdown of the distribution of credit scores among American consumers:
Credit Score Range | Percentage of Consumers |
---|---|
800-850 | 20% |
740-799 | 20% |
670-739 | 20% |
580-669 | 20% |
300-579 | 20% |
As the table shows, 40% of consumers have credit scores in the good to exceptional ranges of 740 or above. The middle tiers from 670-739 and 580-669 each account for 20% of people. The remaining 20% have poor credit scores below 579.
How is the average credit score calculated?
The average credit score is determined by taking the credit scores of a representative sample of consumers and calculating the mathematical mean. The major credit bureaus – Equifax, Experian, and TransUnion – use vast databases of consumer credit information to analyze the distribution of scores. Lenders also analyze scores of their own customer bases.
To ensure a statistically sound and unbiased sampling, the credit bureaus take scores from all consumer age groups, credit profiles, geographies, and demographics. Millions of data points are aggregated. Outlier scores are removed, and then the total is divided by the sample size to generate the mean average.
This process is repeated regularly to identify trends and shifts in national scoring patterns over time. Average scores may fluctuate month-to-month but generally do not drastically swing in short periods. Comparing averages year-over-year reveals broader impacts to credit health and lending behavior.
What factors affect your credit score?
Many elements contribute to an individual’s credit score. The main factors include:
- Payment history – Whether bills and debts are paid on time. This is the most important factor, accounting for 35% of a FICO score.
- Credit utilization – The ratio of credit balances to total available credit limits. Using over 30% of available credit can negatively impact scores.
- Credit history length – In general, the longer the credit history, the better. Having a mix of new and old accounts demonstrates responsible use over time.
- New credit applications – Opening many new accounts in a short period can signal high risk and hurt scores.
- Credit mix – Having different types of credit – mortgage, installment loans, credit cards – illustrates the ability to manage diverse accounts.
Checking your own credit report regularly and maintaining healthy credit habits around payments and balances will help build a strong score over time. Limiting hard credit inquiries from applications and being mindful of how much available credit is used are also beneficial.
How do age and income affect credit scores?
In general, older consumers tend to have higher average credit scores while younger borrowers have lower averages. Income levels also correlate with scoring patterns to some degree. Here are the average scores by age group and income bracket:
Age Group | Average Credit Score |
---|---|
18-24 | 667 |
25-34 | 682 |
35-44 | 701 |
45-54 | 714 |
55-64 | 738 |
65+ | 756 |
Income Bracket | Average Credit Score |
---|---|
Under $20,000 | 662 |
$20,000-$39,999 | 672 |
$40,000-$59,999 | 682 |
$60,000-$79,999 | 701 |
$80,000-$99,999 | 711 |
Over $100,000 | 732 |
Older adults tend to have longer credit histories, lower revolving credit utilization, and better payment records – all factors that increase scores. Higher incomes also allow more flexibility in managing credit repayment and debt-to-income ratios.
How does location impact credit scores?
Geographic location within the United States can influence average credit scores. This may reflect regional economic conditions, demographic profiles, and financial practices. Here are the average state credit scores:
State | Average Credit Score |
---|---|
Minnesota | 722 |
New Hampshire | 718 |
Vermont | 717 |
Massachusetts | 712 |
Washington | 710 |
North Dakota | 709 |
Hawaii | 706 |
Wisconsin | 705 |
Montana | 703 |
South Dakota | 701 |
The Plains, New England, and Western states generally have higher averages. Southern states along the Gulf Coast tend to have lower averages in the high 600s. Individual cities and metro areas may deviate somewhat from their state averages based on localized economic factors.
How do credit scores differ by gender?
Historically, studies have found differences in average credit scores between men and women. However, the gap has been narrowing in recent years as financial equality improves. Here are the current averages by gender:
- Average score for men: 707
- Average score for women: 701
This 6 point difference is smaller than in previous decades. Researchers cite several reasons for past disparities. Women have traditionally had lower individual incomes. Single working mothers can experience gaps in credit history. And women are more likely to be victims of domestic financial abuse.
But stronger financial education, equal pay gains, and economic independence for women have contributed to higher credit scores. Both averages also continue to gradually increase over time thanks to consumer awareness and responsible use of credit products.
Conclusion
The average credit score among American consumers is around 700, which is generally considered good credit. Older adults, higher income earners, and those with long credit histories tend to have higher scores. But diligent financial habits like making payments on time, keeping credit balances low, and periodically checking credit reports will help increase anyone’s score over time. Continued educational and economic advancements around personal finance are also steadily improving averages across all demographics.