Having a good understanding of your credit health is essential. Your credit score plays a crucial role in everything. That is why knowing where you stand and how to improve is vital. In this blog, we’ll delve into the average credit score in the United States. We will explore the credit score range and offer tips for building credit. We will also talk about managing bad credit to enhance your credit profile.
The Importance of Credit Scores
Credit scores play a crucial role in people’s financial lives. Lenders use credit scores to check an individual’s creditworthiness. A good credit score can open doors to better loan terms. It also allows you to enjoy lower interest rates and higher credit limits. Meanwhile, a low credit score can hinder one’s ability to secure loans, rent housing, or even get a job.
Understanding Credit Scores
Credit scores are three-digit numbers that summarize your credit history. We base them on several factors, which include:
payment history,
credit utilization,
length of credit history,
types of credit used, and
recent credit inquiries.
FICO, one of the most used credit scoring models, assigns scores ranging from 300 to 850. A higher credit score shows a lower credit risk and vice versa.
Different Credit Scoring Models
There are several credit scoring models used in the United States. But the most popular ones are:
FICO® score
FICO® scores are the most used credit scores in the United States. Developed by the Fair Isaac Corporation, FICO® scores have been around since the 1950s. Lenders and other financial institutions recognize and use it. FICO bases its scores on information from credit reports. The reports come from the three major credit bureaus. These are Experian Boost, Equifax, and TransUnion.
FICO® scores range from 300 to 850. Higher scores show better creditworthiness. FICO scores have five categories, and they are:
Exceptional (800-850)
Individuals in this range have excellent credit. They are likely to enjoy the best loan terms and interest rates.
Very Good (740-799)
People with scores in this range are also considered to have strong credit. They often receive favorable loan terms.
Good (670-739)
Credit scores in this range are either average or above average. Borrowers with scores in this range have a good chance of loan approvals. But, they may not qualify for the best interest rates.
Fair (580-669)
Scores in this range are subprime. Borrowers with scores in this range may need help getting approved for traditional loans. They may encounter higher interest rates as well. They may also need more access to credit options and improve their credit.
Poor (300-579)
Individuals with scores in this range have poor credit. They may find it difficult to get credit. They may also be limited to high-interest loans or secured credit cards. It is crucial for individuals in this category to work on improving their credit. That is if they want to access more favorable loan terms.
VantageScore
VantageScore is an alternative credit scorscoring model. The three major credit bureaus – Experian, Equifax, and TransUnion – developed it. Unlike the FICO® score, the VantageScore has a range of 501 to 990. The VantageScore provides a more consistent and accurate assessment of creditworthiness across different credit bureaus.
The VantageScore also uses different credit score categories. These categories are:
Excellent (score range of 901-990)
Individuals with excellent credit scores have a high likelihood of credit approvals. They will also enjoy receiving favorable loan terms and interest rates.
Good (score range of 801-900)
Lenders consider those with good credit scores as low-risk borrowers. They can qualify for a wide range of credit products.
Fair (score range of 701-800)
Fair credit scores show individuals may have credit issues or a limited credit history. They may still qualify for loans, but the terms must be more favorable.
Poor (score range of 601-700)
Individuals with poor credit scores may need help to qualify for credit. Also, they may have to pay higher interest rates and fees. People in this category must improve their credit before applying for new credit.
Very Poor (score range of 501-600)
Individuals with very poor credit scores are high-risk borrowers. They may have limited access to credit. These people may need to rely on alternative lending options or secured credit cards to build or rebuild their credit.
The Average Credit Score in the US
According to recent data, the national average FICO credit score in the United States is 717. This reflects a positive credit outlook for Americans as a whole. But, it is crucial to note that credit scores can vary among different age groups, states, and income levels.
Credit Score Distribution
It is helpful to look at the distribution of credit scores in the US to better understand credit scores. While the average credit score is 717, most individuals fall within a specific range.
According to Experian, one of the major credit reporting agencies, the breakdown of credit scores in the US in the third quarter of 2023 is as follows:
Excellent Credit (800-850)
The data shows 21.9% of individuals fall into this category. Those with excellent credit scores have a high likelihood of credit approvals and receiving the best loan terms.
Very Good Credit (740-799)
Around 28.1% of individuals have a very good credit score. This indicates responsible borrowing habits and a low credit risk.
Good Credit (670-739)
The largest segment of the population, approximately 21.6%, falls into this range. People with good credit scores still have access to credit. But, they may face higher interest rates than those with excellent credit.
Fair Credit (580-669)
About 15.8% of individuals have a fair credit score. With fair credit, getting credit or loans may be more challenging. Also, interest rates are higher.
Poor Credit (300-579)
About 12.6% of individuals have a poor credit score. This indicates a high credit risk. It may result in limited access to credit and higher interest rates.
Factors Affecting Credit Scores
Factors that affect credit scores can vary from person to person. Here are some of the critical factors that play a role in determining one’s credit score:
Payment History
A positive payment history is one of the most essential factors in calculating a credit score. Making timely payments on credit cards, bills, and loans can have a positive impact on your score. Late payments, meanwhile, can result in a decrease in credit score.
Credit Utilization Rate
Credit utilization rate refers to how much of your available credit you are using. Experts recommend to keep credit utilization ratio under 30%. It helps maintain a good credit score. Higher credit utilization can show a greater risk of defaulting on payments.
Length of Credit History
The length of credit history also has a role in credit scoring. A longer credit history means you have a track record of responsible credit management. If you have a short credit history, focusing on building a positive credit record may be beneficial.
Types of Credit Used
Credit scoring models also look into the types of credit accounts individuals have. These accounts include credit cards, auto loans, and mortgages. A diverse mix of credit types can help improve credit scores. Having a credit mix shows a responsible use of credit.
New Credit
Applying for new credit can also have an impact in your credit score. When you apply for new credit, the lender will make a hard inquiry on your credit report. Many hard inquiries within a short period of time can lower your credit score.
Also, opening new credit accounts can affect your credit utilization. If you have a low credit limit on a new credit card it can increase your credit utilization ratio. It can lower your score.
How to Improve Your Credit Score
If your credit score falls below the average score or you want to improve your credit standing, here are steps you can take to increase your score:
Pay your bills on time.
Making on-time payments is vital for a good credit score. Set up automatic payments or reminders so you never have to miss a payment. Late payments can lower your credit score. It is vital to focus on paying your bills on time.
Reduce your credit card balances.
Lowering your credit card balances can also help improve your credit utilization ratio. Aim to keep your credit utilization below 30% of your available credcredit limit.
Pay off debt.
Reducing your debt can have a positive impact on your credit score. Focus on paying off high-interest debts first. Then, make consistent payments towards your outstanding balances.
Avoid opening unnecessary credit accounts.
Opening too many credit accounts makes you appear financially overextended. Only apply for new credit when necessary, Also be mindful of the impact it can have on your credit score.
Check your credit report regularly.
Check your credit report for any errors or inaccuracies that could affect your score. If you find any mistakes, report them to the credit bureaus. Also, ensure to have them corrected.
Limit credit inquiries.
As mentioned earlier, many hard inquiries within a short period can lower your credit score. Be selective when applying for new credit. Only do so when there is a genuine need.
Be mindful of closing credit accounts.
Closing old credit accounts with a long and positive credit history can harm your credit score. Experts recommend keeping these accounts open, even with zero balance. That is because they have a positive contribution to your credit history. They show a longer credit track record.
Be an Authorized User
Authorized user tradelines are credit accounts where you become an authorized user of someone else’s credit card. The intention behind this practice is to piggyback off the primary cardholder’s positive credit history. As a result, it boosts your credit score.
Several tradeline companies exist, but only a few offer high-quality tradelines. One of those companies is Coast Tradelines.
Who Is Coast Tradelines
Coast Tradelines is a company that specializes in helping individuals improve their credit scores. We do so by adding them as authorized users on established credit accounts. This process, often called piggybacking, involves leveraging the positive credit history of another person to boost one’s credit profile. Coast Tradelines offers various tradelines with a long history of on-time payments and low credit utilization.
Coast Tradelines has positioned ourselves as a reliable and affordable provider of authorized user tradelines. We take great pride in our commitment to customer satisfaction. We provide a thorough vetting process for tradeline owners and maintaining a responsive customer support team. We offer a wide range of services including credit repair and credit education to complement our tradeline offerings.
Final Thoughts
Understanding the average credit score in the US provides a benchmark for evaluating your credit health. It also helps identify areas for improvement. While the average credit score can give you an idea of where you stand compared to others, the ultimate goal is maintaining a strong credit profile. One that is tailor-fit to your financial needs and goals.
There are plenty of ways to increase your credit score. One effective way to boost your credit score is by purchasing tradelines. It involves becoming an authorized user on another person’s credit account. This strategy can enhance your credit score by adding a positive credit history. It also helps improve your credit utilization ratio and diversify your credit profile. But, it is crucial to buy tradelines from reputable companies. Doing so ensures you receive legitimate and beneficial services.
Coast Tradelines is a trusted provider in this field. We offer a wide selection of seasoned tradelines with positive payment histories and low credit utilization rates. With a commitment to customer satisfaction and a transparent process, Coast Tradelines helps individuals navigate the complexities of credit improvement. By partnering with a reliable company like ours, you can take a significant step toward achieving and maintaining a healthy credit score. It opens doors to better financial opportunities.
Explore the services we offer. Take control of your financial future today. You can build a strong credit profile with the right strategies and support. One that will benefit you for years to come.
