Average Credit Scores By Race
Of course, credit scores differ widely among individuals, but could there be credit scoring differences between races? It seems so.
Here is the breakdown of average scores, as reported by the company Shift Payment Processing:
Although there is a 68-point disparity between the highest and lowest scores, the great news is that people from all groups have average credit scores that are at least in the good range of 670 and higher.
That means that lenders will look favorably at those numbers for credit card and loan applications .
Still, better credit scores especially those in the excellent range have an impact on the interest rates that a lender will offer. In most cases, the higher the scores, the lower those rates will be.
Fico Score Rating Categories
Now that you understand the basics of credit scores, are you ready for the big reveal?
According to MyFICO, the average FICO score in America for 2021 was 716.
If you look at the credit score range above, youll see that a credit score of 716 falls just within the good rating. An average FICO credit score of 716 FICO is a record high.
Since the average credit score falls within the good category, you can do quite a bit in terms of loans. An FHA home loan, for example, only requires a score of 580 to qualify and take advantage of the programs 3.5% down payment.
If you still qualify for the loan buy your score falls below that number, youll need to put down 10% of the loan price at the time of closing. For conventional loans, lenders usually require a minimum score of 660. So if your credit score is close to the average FICO score, your mortgage prospects look promising.
How To Check Your Credit Score
Checking your credit score was once a difficult task. But today, there are many ways to check your credit scores, including a variety of free options.
Your bank, credit union, lender or credit card issuer may give you free access to one of your credit scores. Experian also lets you check your FICO® Score 8 based on your Experian credit report for free.
The type of credit score you get can depend on the source. Some services may offer you a version of your FICO® Score, while others offer VantageScore credit scores. In either case, the calculated score will also depend on which credit report the scoring model analyzes.
Some services even let you check multiple credit scores at once. For example, with an Experian CreditWorks Premium membership, you can get your FICO® Score 8 scores based on your Experian, Equifax and TransUnion credit reportsplus multiple other FICO® Scores based on your Experian credit report.
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What Ages Have The Most Perfect Credit Scores
Achieving a perfect credit score of 850 is a goal for many consumers. After all, it can help them attain better loans, and utility discounts. Roughly 58% of consumers with a perfect credit score of 850 are between the ages of 56 and 74. This score is two steps up from the average FICO® score of 703, which is ranked as good by Experian.
Between 56 and 74, consumers are more likely to have an increased income. This can help them pay off a significant amount of debt and contribute to an increase in their score. Conversely, they may have also already paid off most of their debt and have lowered their , which has a significant impact on credit scores next to payment history.
While achieving a score of 850 is ideal, it isnt needed to get better interest rates or offers. Getting a score of 760 or very good is enough to give you access to better interest rates or options.
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Strive For A Diverse Credit Mix
Having a variety of credit types isnt a huge factor in determining your credit score, but every bit helps when youre working toward making yours better. When lenders see you using credit responsibly in several different ways credit card loans, student loans, home loans, auto loans, etc. it gives them a little more peace of mind.
As youve likely surmised already, the more comfortable lenders get with your behaviors regarding credit, the better your score will be.
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What Is A Good Credit Score
A credit score is a three-digit number that is calculated from information on a credit report and generally ranges between 300 and 850. A good credit score is 670 to 739 on the FICO® Score range, while a credit score of 661 to 780 is good on the VantageScore® range.
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A credit score ranges from 300 to 850 and is a numerical rating that measures a person’s likelihood to repay a debt. A higher credit score signals that a borrower is lower risk and more likely to make on-time payments. Credit scores are often used to help determine the likelihood someone will pay what they owe on debts such as loans, mortgages, credit cards, rent and utilities. Lenders may use credit scores to evaluate loan qualification, credit limit and interest rate.
For a score with a range between 300 and 850, a credit score of 700 or above is generally considered good. A score of 800 or above on the same range is considered to be excellent. Most consumers have credit scores that fall between 600 and 750. In 2021, the average FICO® Score in the U.S. reached 714an increase of four points from the previous year. Higher scores can make creditors more confident that you will repay your future debts as agreed. But creditors may also set their own definitions for what they consider to be good or bad credit scores when evaluating consumers for loans and credit cards.
Average Credit Score By Age Group In 2020
While looking at average credit scores can give you a gauge of where you stand in relation to the rest of the country, the only score that ultimately matters is your own. Is it high enough to qualify you for the loans you want and help you achieve your financial goals? If it is, make sure to maintain it by practicing good credit habits. If it isnt, look at steps you can take to improve it.
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Average Credit Score By Income
The higher ones income level, the higher their average credit score tends to be.
While debt-to-income ratio doesnt play a direct role in determining one’s credit score, it does have an indirect one. One of the factors lenders consider when modeling an individual’s credit risk is their credit utilization the percentage of total available credit a consumer is using month to month.
To improve one’s credit score, credit utilization should generally be kept below 30%. The lower one’s income is, the more a consumer may rely on their credit for their expenditures.
Another way income may play into credit utilization, and ultimately one’s credit score, is by determining one’s . Credit issuers look at borrowers incomes when deciding on the amount of revolving credit that should be issued.
The lower one’s income, the lower their line of credit is likely to be.
In turn, by having significantly lower credit limits, it becomes easier for lower-income individuals to eat up a larger portion of what’s available, increasing their credit utilization.
The graphic belows shows that median credit scores are highly correlated to income.
- Low income: Up to 50% of the area median income
- Moderate income: Greater than 50% and up to 80% of the area median income
- Medium income: Greater than 80% and up to 120% of the area median income
- High income: More than 120% of the area median income
How Are Credit Scores Changing
The average FICO score has held steady. This marks the first time since the late stages of the Great Recession that we havent seen an increase in the average score, says Ethan Dornhelm, FICOs vice president of scores and predictive analytics.
Early in the pandemic, credit protections such as pauses on student loans and mortgage payments helped shield credit scores, and consumers with scores between 550 and 599 saw the biggest increases in scores in 2021 from 2020. Their scores rose about 20 points.
Now, as stimulus and other financial accommodations wind down, numbers are returning to pre-pandemic levels. In 2022, consumers in the 550 to 599 range saw a 7 point score increase. That matches the increase seen between April 2019 and April 2020.
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Monitor Your Credit Report And Score
Checking your credit score right before you apply for a new loan or credit card can help you understand your chances of qualifying for favorable termsbut checking it further ahead of time gives you the chance to improve your score, and possibly save hundreds or thousands of dollars in interest. Experian offers free credit monitoring for your Experian report, which in addition to a free score and report, includes alerts if there’s a suspicious change in your report.
Keeping track of your score can help you take measures to improve it so you’ll increase your odds of qualifying for a loan, credit card, apartment or insurance policyall while improving your financial health.
How To Improve Your Credit Score:
Another common question when dealing with credit scores is What can I do to improve my score? There are many ways to improve your credit score to the higher end of the scale. Some of these methods include:
- Cleaning up your credit report
- Paying down your balance
- Negotiating outstanding balance
- Making payments on time
Credit.org offers consumers help in managing multiple payments. With a Debt Management Plan, you have the possibility of joining these payments into one lump sum with a lower interest rate. Learn more by reaching out to one of our today!
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How To Get Your Credit Scores For Free
If you dont know your credit scores, dont worry. You can get your VantageScore 3.0 credit scores from Equifax and TransUnion for free, along with your credit reports from these two bureaus, on Credit Karma.
However, if youd like to see your FICO® scores, you can purchase access to them on the MyFICO website. Additionally, some issuers offer members access to their FICO® scores for free, so check in with your bank or credit card issuer to see if its offered.
If youve checked your scores and think theres room for improvement, there are ways to build your credit. A good starting point is learning the factors that can affect your credit scores.
Average Credit Scores By Age
The older a person is, the more likely he or she is to have the highest FICO Scores, according to 2019 data compiled by Experian. Consequently, younger peoples scores fall to the bottom of the scale:
It makes sense that people who are just starting out in the world of credit garner the lowest scores because it takes time and effort to build an impressive credit history. To do so, a person would need to use a variety of credit products responsibly for several years.
Consumers credit scores tend to steadily rise every year because they have richer data appearing on their credit reports. Borrowers with good credit usually finance cars and homes and use and repay multiple credit and charge cards. The more positive borrowing information that is listed on a credit report, the better the persons scores will be.
So why do credit scores dip a little lower for people in the very oldest age group? Recent borrowing activity is the likeliest reason.
This demographic may not have as much need to borrow for what they want to buy and use their assets instead. Therefore, they wont have the same amount of new information appearing on their credit reports as they previously did.
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What Is A Personal Loan
A personal loan is an unsecured sum of money that you borrow from a bank, credit union or online lender.
Once you receive the loan funds, you begin making monthly payments on the loan, plus interest, over a set repayment period. Personal loans can be used for any purpose but are most commonly used to consolidate debt and refinance credit cards.
Using a personal loan to consolidate debt allows you to combine multiple outstanding debts into one loan. This means you only have to pay one monthly fee with one consistent interest rate, as opposed to dealing with multiple lenders at one time.
Debt consolidation can help borrowers stay on top of their monthly payments. It may save you money in the long run by combining all of your debt under one interest rate. Debt consolidation can also improve your credit score, particularly when you consolidate outstanding credit card debt. Consolidating your credit card debt with a personal loan allows you to lower your credit utilization rate, which improves your credit overall.
While debt consolidation and credit card refinancing are the most common uses of a personal loan, other potential uses include home improvement, major purchases, medical bills, wedding expenses, etc.
The Difference Between A Fico Score And Vantagescore
There are two types of scoring models that are used by the credit bureaus: FICO Score and VantageScore. While they are similar, there are some noteworthy differences in how each model works to calculate your credit score.
FICO Scores range from 300 to 850. The average FICO Score of 714 is considered good by most lenders. Heres a breakdown of the FICO Score ranges and what they mean:
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What Is Considered As A Poor Credit Score
According to Capital One, a FICO score that falls below 580 is considered to be a poor credit score. Lower credit scores can make it difficult to get approved for credit cards or loans as approximately 61 percent of those with low credit scores fall behind on their loans11.
Come up with a credit card debt or loan repayment plan to reduce debt and credit utilization, look for accounts that build credit, and find other ways like Experian Boost to improve your score if you have negative items contributing to your bad credit.
Experian also offers free credit score checks to help you stay on top of your score and payment history. Your credit card balance doesnt have to stop you from moving forward financially.
You Dont Have Just One Credit Score
When people say credit score theyre usually talking about just one credit score. But the truth is that we all can have multiple credit scores, and they may not all be the same. Thats because there are different credit-scoring models that can be used for the information in each of your credit reports. Thats the reason you have multiple scores. For example, there are industry-specific scores based on the information in your credit reports.
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Comparing Personal Loan Rates
Start by looking for lenders that offer a prequalification process for personal loans. Lenders provide a range of rates online, not an exact rate based on your specific qualifications. Prequalifying provides a more accurate view of the rate youll receive. During the prequalification process, lenders run a soft credit check, which has no impact on your credit score.
Lenders generally provide you with a list of options after you prequalify that includes loan rates, terms and limits. You can find the best loan for your circumstances by prequalifying at multiple lenders and comparing loan offers.
Prequalification doesnt imply approval for a loan. Youll still need to submit a formal application and additional documentation to get the loan you want. Typically, lenders run a hard credit check when youre officially applying for a loan. Hard credit checks can ding your score by one to five points.
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Whats The Average Credit Score By Age
Your age doesnât directly impact your credit scores. But older people generally have better credit scores than younger people do.
According to Experian, Americans who are 75 and older regularly have the highest FICO scores of any generation. One possible reason: Credit scores are partly determined by your . And a longer history of responsible credit use can result in a better score.
But in 2021, Millennials and Gen Z experienced the biggest credit score increases. Their credit scores increased by seven points on average.
You can look at the following average scores to get a sense of where you stand compared with others your age.
Average FICO Score by Age Group in 2021
Source: Experian 2021 Consumer Credit Review
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Why Is Your Credit Score Important
Your credit score is used to determine more than just the interest rate and terms such as down payment or size of credit line, for which you may qualify . Here the difference between fair and good is a big one, even though the numbers back into each other.
Being short just one point can put you in a lower and more expensive category. Credit scores, and the reports that create those scores, are increasingly used by insurance companies, landlords and even employers . This means your credit report or the score generated from it is likely to factor into the insurance rate you are charged, your acceptance for a new place to rent or lease or even a promotion at your job.
And when it comes to new loans, getting to the next tieror worse, falling into the lower oneis likely to mean real dollars, either up or down. So, finding out where you stand is crucial for the next step.