Average Credit Score – matters for creditors and financial institutions.

At present in the United States, the scoring models for a credit score is Fair Isaac Corp and Vantage FICO Score. Their models range from 300 to 850. For some economic reasons, the average credit score varies based on age, income level, state, population, and lots more.

However, the general average score in America is 695. However, some scoring models can increase or reduce it slightly to fall between 660 and 720.  When it is like this, the Consumer Financial Protection Bureau calls it ‘’prime’’ average score. But you must know that 14% of the US population has no credit score. This makes it very hard for them to get new lines of credit.

Average Credit Score - matters for creditors and financial institutions.

On the other hand, the credit score of individuals matters a lot for creditors and financial institutions. The credit score of a person determines if he or she is creditworthy. A good credit score can help you get a personal, auto, or mortgage loan and a credit card. It can as well impact your lending terms and most importantly interest rates. The higher the credit score you have, the lower the interest you pay. Sounds good, right?

Breakdown of Credit Scores

620 or lower is bad

620 to 659 is poor

666 to 719 is average or fair

720 or more is excellent.

Average Credit Score by Income

The debt-to-income ratio

plays an indirect role in determining one’s credit score. No wonder FICO considers the percentage of total available credit a consumer is using monthly. To improve your credit score, keep your credit utilization at 30%. If you have a low income, there is a tendency to rely on a credit card for your expenses. To avoid this, spend within your means, avoid impulse buying know that credit card money is a debt you must payback. You can also get an extra job if you really need money.

Also, if your income is low, your credit limit will also below. No creditor will give a low-income earner big credit. Creditors cannot take the risk of not getting their money back. Now, if you have low income and a low credit limit, you are more likely to spend a high percentage of what you have at your disposal. That is where credit utilization comes in.

Average Credit Score by Age

It is a proven fact that many individuals’ average credit score usually increase with age. But for people from 30 to 39 years, the case is different. These are the largest population of consumers as they face a lot of major expenses like getting married, having families, mortgage, and many more. A study of American Credit card habit proves that people within this age have the highest credit card debts

Another group of people whose average reduces are people below 30. They usually have just a few accesses to credit. From the 2009 CARD Act, it is hard for people between 18 and 21 to get credit card accounts. This makes it very hard for young people to build their credit. It is around 40 that people build good to excellent credit and this keeps improving with age.

Average Credit Scores in the US

Do you know that the lowest credit scores in America is found in the Southern states like Alabama, Louisiana, Mississippi, and Arkansas? They have the lowest percentage of the population with an open credit card or home equity line of credit. But due to the recession, since 2005, many people have had a decline in open credit accounts. Even though other parts of the country have been recovering, these states seem to still be highly affected.

However, states like Minnesota and North Dakota seem not to be affected at all as the average credit scores here are at 709 and 697 respectively.

According to the Federal Reserve Bank of New York, the states below were the only states where over 40% of the populations were Subprime.

  • Alabama
  • Arkansas
  • Florida
  • Georgia
  • Louisiana
  • Mississippi
  • Nevada
  • New Mexico
  • Oklahoma
  • South Carolina
  • Tennessee
  • Texas

Average Credit Score of Home Buyers

About 85,369 persons applied for a mortgage and only 6.8% had scores below 620. This report is coming from the Federal Reserve. All groups from the report apart from Black and Afro-Americans had average credit scores above 700. Asian borrowers had the highest average score of 745. If you have questions, let’s know in the comment section.

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