The average credit score in the United States generally ranges between 680 and 706 as of 2018 and depends on the credit report and credit score model used. These scores are important as they help lenders determine whether to approve you for a new line of credit and the interest rates you’re offered.
The two primary credit scoring modes in the U.S., FICO and Vantage Score, consider similar factors and use a similar range of scores. Because they use different methods to calculate scores, pinning down a true average can be difficult, but below we share some indicators to show how your credit score compares to other consumers.
What’s a good score?
Each lender sets its own standards to determine what a “good” score is, but FICO and VantageScores over 690 are generally considered good credit scores. Scores above 720 are typically considered excellent. According to both scoring models, scores in these ranges are likely to be approved for loans because consumers with these scores are better at managing their debts.
- Bad credit, in the 300-629 range can make it hard to qualify for credit and leaves you with only a few options when you need to borrow money
- Fair credit, in the 630-689 range, provides more options, but you’ll still face limited card options as well as higher interest rates
- Good credit, in the 690-719 range, can give you access to lower interest rates and more choices
- Excellent credit of 720 and up opens doors to most rewards credit cards and the lowest interest rates
What factors determine your credit score?
Scoring models take into consideration factors collected from the three main U.S. credit bureaus: Equifax, Experian, and TransUnion.
- Payment history. Payment history shows whether or not you have a history of late or missed payments. Late payments, missed payments and delinquent accounts, on the other hand, can negatively impact your total score.
- Credit utilization ratio. Credit utilization ratio refers to the total amount of credit you’re using or debt you’re carrying compared to the total amount of credit available to you. The lower your credit utilization ratio, the better your score will be. Ideally, you should use no more than 30% of your total credit limit.
- Length of credit history. This factor refers to the length of time that your credit history has been established. The age of your credit history is important because it allows lenders to get an idea of how you manage your debts over time. The longer your credit history, the better your score.
- Types of credit. Lenders want to make sure you have experience with different types of debt. As such, the types of credit you carry have an impact on your credit score. Your credit score will benefit if you have both revolving lines of credit (like credit cards) and installment loans (such as car loans, home loans and student loans).
- Number of new credit applications. Each time you apply for a credit card or a loan, card issuers and lenders will assess your credit history. That assessment is considered a “hard inquiry.” The more hard inquiries you have on your credit report, the more impact on your score. In the eyes of lenders, multiple applications for new lines of credit and loans over a short period may be a sign that you are in financial distress and may not be able to repay your debts.
Credit scoring models are designed to be an unbiased assessment of potential borrowers’ credit history. They do not take any of the following information into consideration when calculating your credit score:
- Marital status
- Employment history
- Place of residence
- Consumer disclosure inquiries (inquiries you make to review your own credit report)
- Promotional inquiries (requests that lenders make to determine if you’re pre-approved for a credit offer)
- Account review inquiries (made by creditors and employers to review your credit history)
- Promotional inquiries
Some lenders may consider information about your salary, employment history and occupation when determining if you are qualified for a loan or a credit card.
Are there “minimum” credit scores required for loans and credit cards?
There is no “minimum” credit score requirement for most revolving lines of credit and installment loans. However, it’s important to note that the lower your credit score is, the less likely you will receive favorable interest rates on any loans or credit cards you are approved for, if you are approved at all.
Lenders determine your creditworthiness using your credit score. Credit card issuers and loan suppliers want to ensure that the money they lend will be repaid, and your credit score can give them insight into your ability to repay borrowed money.
How to improve your credit score
Financial experts recommend reviewing your credit report on a regular basis. Doing so can give you an idea of your financial standing. Remember that this three-digit number is not set in stone, so if your score is not where you want it to be, you can take steps to improve it.
First, when reviewing your credit report, check for errors like inaccurate information or rectified negative marks that have not yet been removed.
If you find any errors, you can dispute them with the credit bureaus and request that the information be removed. If there is inaccurate information on your credit report, having it removed will automatically increase your credit score.
If, however, all information is accurate and your score could use improvement, the following steps can help you achieve your goal:
- Make payments on time, every time and for at least the minimum amount due. This applies to all bills received, including loans, credit cards, cell phone plans and rent. Payment history has the biggest impact on your credit score.
- Pay your debts. Your credit utilization rate also has a significant impact on your credit history, so the lower your balances are, the better your score will be.
- Actively use your existing accounts. Length of credit history includes how actively you are using your credit cards, so using them on a regular basis can help bump up your score.
- Avoid applying for multiple lines of credit, at least until your credit score improves. New credit applications may have a minimal impact on your credit score, but when you’re trying to increase your score, every little bit helps.
For more resources on how to navigate your new life in the U.S., visit Nova Credit’s resource library where you can learn about everything from renting an apartment to finding the best credit cards for noncitizens.
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