What Score is Considered Average Credit?
Credit scores play a crucial role in determining an individual’s financial health and ability to obtain loans, mortgages, and credit cards. One of the most common questions that people have regarding credit scores is what score is considered average credit. Understanding this threshold can help individuals better manage their credit and work towards improving their financial standing.
Average Credit Score: What Does It Mean?
The average credit score varies depending on the credit scoring model used. The most widely recognized scoring models are FICO and VantageScore. According to FICO, the average credit score in the United States is around 711. This score falls within the “good” credit range, which typically ranges from 670 to 739. On the other hand, VantageScore reports an average score of around 678, also within the “good” credit category.
Factors Affecting Credit Scores
Several factors contribute to an individual’s credit score, including payment history, credit utilization, length of credit history, types of credit used, and new credit accounts. Maintaining a good payment history is the most significant factor, accounting for about 35% of a FICO score. Keeping credit utilization below 30% of the available credit limits is also crucial. Additionally, having a mix of credit types and a long credit history can positively impact a credit score.
Improving Average Credit Score
If an individual’s credit score is below the average range, there are several strategies to improve it:
1. Pay bills on time: Late payments can significantly damage credit scores. Make sure to pay all bills, including credit card statements, on time.
2. Reduce credit utilization: Lowering the amount of credit used can positively impact credit scores. Aim to keep credit utilization below 30%.
3. Pay off debt: High levels of debt can negatively affect credit scores. Focus on paying off high-interest debts first.
4. Monitor credit reports: Regularly review credit reports for errors or discrepancies and dispute any inaccuracies.
5. Don’t close old credit accounts: Length of credit history is a crucial factor in determining credit scores. Keeping old credit accounts open can help improve your score.
Conclusion
Understanding what score is considered average credit can help individuals better manage their financial health. By focusing on maintaining good payment habits, managing credit utilization, and monitoring credit reports, individuals can work towards achieving an average credit score and improving their financial future.
