How Credit Works

What Is the Average Credit Score?

When you check your credit score, you probably want to know how your credit score compares to everyone else, right? It seems there should be a simple answer, but, unfortunately, it’s a little more complicated.

Whether you are trying to build credit without a credit card or you are looking to improve your bad credit score, learning how your FICO score works is an excellent way to establish good financial standing with credit bureaus.

In this article, we’ll answer the question, "What is the average credit score?" and also provide tips on how to improve it if you have poor credit or no credit history at all.

What determines your credit score?

Your FICO credit score is a number from 300-850 that is used by 90% of lenders to determine your creditworthiness. The average FICO credit score in America sits around 690, give or take a few points. Overall, the average credit score ranges from about 640–720.

The two most important factors that determine your credit score are your payment history and credit utilization. These two factors make up 65% of your FICO score.

By paying off your credit card payment in full each month, you can avoid paying an interest rate. When it comes to your credit utilization, lenders recommend that you use less than 30% of your credit line each month. This shows creditors that you don’t rely on your credit on a monthly basis to get by with your financial obligations.

Other major factors in your credit score include the average length of your credit history, new credit accounts and the types of credit you use.

What is the Average Credit Score

So, what’s an average credit score these days? The average credit score ranges from 640-720.

People under 30 have an average credit score around 640. That is considerably lower than adults over 50, whose average score is closer to 700. So when comparing your score, take the “average” with a grain of salt.

Good to Excellent Credit

But a lender does not want to see an average borrower. Lenders look for those with good to excellent credit and reward them handsomely with lower interest rates and fees. And raising your credit score from an average score to an excellent score is achievable with a little grit and patience. Raising your score is not an overnight process, so it’s important to begin now and maintain a good credit history.

How can you take an average credit score to excellent? First and foremost, make on-time payments every month when using a revolving credit line, such as a secured credit card or paying off any loans, like a car loan or mortgage. This is the number one factor in your credit report. Then, control your debt, especially with credit cards. These may seem like free money, but credit cards come at a high cost if misused. Most experts suggest that you never utilize more than 30% of your credit limit. See more about how your credit score is calculated.

Start with responsible use, maintain a low debt, and pay EVERY bill on time. This will help you establish a credit history, and the longer the history is in good standing, the more you can benefit. And if you want to diversify your types of credit — another thing creditors look for — consider installment options like a Self Lender credit builder account. Credit builder loans are a great option for someone with below average credit looking to build a credit history.

What hurts your credit score the most?

Wondering what can hurt your credit score? Late payments are one of the many factors that cause bad credit. Just a single late payment can affect your FICO score, which is why you should be making payments on time.

Another possible reason that may lower your credit score is how much available credit you are using. High credit utilization could signal to your lender that you’re dependent on your credit line for monthly bills and expenses.

Lastly, do not apply to several credit cards or other credit lines at once, as each hard inquiry can ding your score. Before accepting you as a borrower, lenders will review your file to make sure you haven’t applied for multiple credit lines within a short amount of time.

Below we will go over how to build credit fast so you can start establishing a good credit history for your financial future.

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How to build strong credit: Our top tips

1. Pay bills on time

Once you've opened a credit account, it's important to pay your bills on time. Late payments may result in bad credit, which can be damaging. In order to get a higher credit score, make regular payments, and do not reach your credit limit. This will ensure that you are able to make your payments on time and maintain a healthy financial status.

2. Analyze credit & adjust habits

Another great way to improve your score is to do a credit check to see where you can improve. Analyzing credit utilization, where your score is, and how your credit report looks can help you adjust your habits for the future.

3. Open credit lines with care

If you want to build credit, it may help to have a healthy mix of different credit accounts.

Now, this doesn’t necessarily mean you should start several different credit cards (in fact, you shouldn’t do this if you won’t be able to pay them off!).

What it means is to use revolving credit, like a credit card and have an installment loan (like an auto loan, a mortgage loan, or a credit builder loan). This can help show creditors that you are responsible for paying back different types of credit and have a healthy financial standing.

While it’s not a guarantee, following these tips should be able to help you establish a higher credit score or at least improve poor credit. Even if you have available credit, that doesn't mean you have to use it all.

Looking for more help on establishing good credit? Check out our credit builder loans today to get started on building good credit.