Understanding what it all means will greatly improve the chances for obtaining the highest credit score possible.
According to a survey by OnePoll of 2,000 Americans, reported by the New York Post, one in eight respondents have no clue what their credit score is. Of those who have some familiarity with their score, a whopping 46% have not checked it in the last two months.
A FICO (or credit) score is a mathematical analysis of debt, payment history, outstanding loans or liens, and any other kind of statistical data collected by credit bureaus. At its core, it’s a snapshot of an individual’s credit history, conveniently rolled into a three-digit number and evaluated regularly by lenders, employers, insurance agents, as well as an entire host of others for various reasons. A good credit score can aid in the home-buying or job-seeking process, while a bad credit score can hinder it.
According to Value Penguin by Lending Tree, the average credit score in America is 695. This average is actually at an all-time high. The range of scores are as follows:
Nearly Perfect: Above 800
Very Bad: Below 600
14% of the population has no score whatsoever. They are labeled as “credit invisible” and have difficulty obtaining new lines of credit. The average credit score of homebuyers in America is 728, slightly above national average.
Tips to Improve your Credit Score
Your credit score is the culmination of your entire credit history, including your debt and payment history, among other statistical factors. It is the key that unlocks everything from securing a loan to qualifying for a job to buying a home; and the importance of good credit should not be overlooked. It takes patience and consistency to build a high credit score, but it is something everyone can achieve. Follow these helpful tips from debt.org to improve your score:
- Keep tabs on your credit – You can request a free credit report once a year from each of the three major credit reporting agencies: Experian, TransUnion and Equifax.
- Don’t forget – Set up payment reminders by writing down deadlines and/or adding them to your calendar. Paying your bills on time consistently can raise your score in just a few months.
- Pay twice – If you can afford it, pay your bills every two weeks instead of monthly to improve your score.
- Contact creditors – Set up a payment plan immediately with creditors if you miss payment deadlines and can’t afford your monthly bills. The quicker you address the problem, the easier it will be to repair.
- Apply sparingly – Although opening new credit accounts increases your total credit limit overall, it takes a bite out of your score if you apply or open several new accounts in a short period of time.
- Don’t close your credit cards – Keep unused credit card accounts open because the age of your history matters for a healthy score. A longer history is always preferable. If you must close credit cards, choose to close newer ones.
- Use caution when paying off old debts – If a debt is “charged off” by the creditor, they do not expect further payments from you. If you make a payment on a charged off account, the debt is then reactivated and subsequently lowers your credit score. This usually happens when collection agencies are involved.
- Pay down maxed out credit cards first – If you use multiple credit cards and one (or more) has a balance that is close to or right at the limit, pay it down first to bring down your credit utilization rate, which is the percentage of available credit used during a billing cycle.
- Diversify your accounts – Your credit mix -- mortgage, auto loans, student loans and credit cards -- counts for 10% of your credit score. Adding another element to the mix helps raise your current score, as long as you are able to make timely payments.
- Consider debt consolidation – If you find yourself overwhelmed by credit card debt, consider a debt consolidation plan. Your score might temporarily drop upon signing up, but will quickly improve if you make your payments on time. As a bonus, you are eliminating the debt that got you in trouble in the first place.
Credit Score Trends Among Americans
- The average credit score in America is 695, which is currently at an all-time high, according to Value Penguin
- 14% of the population has no credit score whatsoever and are labeled as credit invisible, meaning they will struggle to obtain new lines of credit
- The typical credit score of a homebuyer in America is 728
- 1 in 8 Americans are unaware of their credit score
- Out of 2,000 Americans, polled by OnePoll and reported by the New York Post, 13% have no clue what their credit score is
- Even those who check their credit score, a whopping 46% haven’t done so in over two months
- 71% of Americans polled are totally unaware of the various ramifications associated with bad credit
- However, 74% say they know a lower or bad credit score prevents someone from the life they want to live