More than 50% of Americans check their credit score every month — and it’s a good thing.
Understanding your credit score is crucial to have a clear picture of your creditworthiness and financial options. It can also lead to better borrowing habits and money management. What’s more, knowing how your credit score compares to others across the country can give you a sense of how you’re handling your finances.
So, what is the average credit score in America? Below, we answer this question and others to provide crucial information that can help you improve your financial health.
How is your credit score calculated?
Your credit score is calculated based on information in your credit report from the three main credit bureaus — Experian, Equifax and TransUnion.
These bureaus gather information independently and don’t share information. As a result, there tends to be credit scoring fluctuations. For instance, you may have a higher credit score from one bureau than another. However, there are some common factors that impact your credit score, including:
- Your bill-paying history and whether you pay bills on time
- The amount of unpaid debt you carry
- Your credit history, including whether you’ve missed payments
- How many loans you have open and how long they’ve been open
- New credit applications
- Your credit utilization, or the percentage of available credit that you’re using
- Whether you’ve declared bankruptcy or had a debt sent to collections
FICO credit scores fall into the following ranges:
- Poor: 579 or less
- Fair: 580-669
- Good: 670-739
- Very Good: 740-799
- Excellent: 800 and above
How does a credit score affect you?
A good credit score increases your ability to get a loan at a competitive interest rate. The lower your interest rate, the less money you pay in the long run. If you have a high interest rate, your debt can significantly increase. Furthermore, having a lower credit score can make it tougher to secure funding to rent an apartment, buy a house or car and even sign up for utility services.
One study found that going from a fair credit score (580 to 669) to a very good score (740 to 799) can save individuals up to $41,416 on their mortgage loan. When factoring in other types of debt like student and auto loans, a higher credit score saves $56,400.
What is the average credit score in America?
In 2019, the national average FICO score was 703, a record-high, according to the 2019 Consumer Credit Review by Experian. Nearly 60% of Americans have a FICO Score of 700 or higher, which is the largest percentage ever at that level.
The report suggests that consumers today are monitoring their credit scores more closely and proactively managing their finances. For instance, fewer people had late payments and lower credit utilization, both of which can lead to a higher credit score.
Below are the average credit scores broken down by state, courtesy of the Experian report:
- Alabama = 680
- Alaska = 707
- Arizona = 679
- Arkansas =683
- California = 708
- Colorado = 718
- Connecticut = 717
- Delaware = 701
- District of Columbia = 703
- Florida = 694
- Georgia = 682
- Hawaii = 723
- Idaho = 711
- Illinois = 709
- Indiana = 699
- Iowa = 720
- Kansas = 711
- Kentucky = 692
- Louisiana = 677
- Maine = 715
- Maryland = 704
- Massachusetts = 723
- Michigan = 706
- Minnesota = 733
- Mississippi = 667
- Missouri = 701
- Montana = 720
- Nebraska = 723
- Nevada = 686
- New Hampshire = 724
- New Jersey = 714
- New Mexico = 686
- New York = 712
- North Carolina = 694
- North Dakota = 727
- Ohio = 705
- Oklahoma = 682
- Oregon = 718
- Pennsylvania = 713
- Rhode Island = 713
- South Carolina = 681
- South Dakota = 727
- Tennessee = 690
- Texas = 680
- Utah = 716
- Vermont = 726
- Virginia = 709
- Washington = 723
- West Virginia = 687
- Wisconsin = 725
- Wyoming = 712
How does knowing the average credit score in America help you?
A credit score is a direct representation of your creditworthiness, so it’s crucial to know what your score is. Credit scores allow lenders to predict the likelihood that you will repay a loan on time. Lenders can use your credit score to determine whether they should lend you money, how much and at what interest rate.
Focusing on the credit scores of others doesn’t solve any challenges you might have. Only you can work toward improving your credit score with sound financial habits, such as paying down your debt and making timely payments.
Still, knowing the average credit score in America (and your state) can give you an idea of the interest rate you might secure for a loan. For instance, let’s say you’re looking to buy a car and need to borrow money. Now, say the average credit score in your state is 675. However, you have a score of 775.
When you enter the car dealership, you’ll be a more attractive option to the lender. Because your score is 100 points higher than the average customer, a lender will likely be more eager to work with you. As such, there’s a good chance you can receive a competitive deal and a lower interest rate.
Knowing your credit score provides a good barometer of where you stand against other borrowers. However, this isn’t something to stress about. Instead, take steps that will help you increase your credit score.
How can you improve your credit score?
If your credit score is well below the national average or the average in your state, there are some steps you can take to improve it.
Pay your bills on time
Missed payments tend to wreck credit scores. Be sure to make on-time payments on all your credit card balances as well other bills, such as those for utilities and phone. If you’re behind on payments, work to bring them current as quickly as possible.
Don’t apply for multiple new credit cards
When you formally apply for a credit card or loan, lenders check your credit report. This process is known as a hard inquiry or hard pull. Hard inquiries can negatively impact your credit score and remain on your credit report for two years.
While the occasional hard credit pull is simply the nature of doing business, applying for several credit cards in a short period will hurt your credit score. If you must apply for a credit card, make sure that you have a strong chance of being approved.
Pay off debt
Credit utilization, which is measured by adding all of your credit card balances and dividing them by your total credit limit, also plays a role in your credit score. Lenders typically want to see you with a credit utilization of 30% or less.
Paying off credit card debt is one of the best things you can do for your credit score. Start by making minimum monthly payments on time. If you’re struggling to keep track of your monthly payments, consider opening a line of credit.
For example, Tally is an automated credit card payoff app that combines all of your cards into one monthly payment. Tally pays down your debt quickly and efficiently by offering a low-interest line of credit, which helps you start saving money immediately.
Understand your credit score to break through financial plateaus
Credit scores measure how likely you are to repay debt. The difference between a poor credit score and a good credit score can save you tens of thousands in interest throughout your life. Taking the time to know your credit score and how it works can put you ahead of the game and in a better position than many Americans.
Although you should be mindful of the average national credit score, don’t get bogged down comparing yourself to this score. It’s not essential to focus on questions like, “What is the average credit score in America?”
Instead, determine the best solutions for your financial situation. Paying your bills on time or using a credit card payoff app like Tally can go a long way toward helping you improve your score.