US credit score statistics: what do they tell us?
Dive into American credit score statistics to understand the broader economic trends shaping borrowers' access to credit and financial stability.
Summary
The US national average credit score, now at 717, has declined for the first time in a decade.
Credit scores vary across the US, with Minnesota boasting the highest average FICO score at 742 and Mississippi the lowest at 680.
Credit card utilization has risen from 33% to 35%, with an increase in past-due missed payments.
The COVID-19 pandemic exacerbated financial challenges, leading to a surge in credit card balances surpassing $1 trillion.
What is the average US credit score?
Current US credit score statistics show that the landscape of credit scores in the United States is undergoing a significant shift, marked by a few notable trends.
According to a report from FICO, the national average credit score in the US has declined for the first time in a decade, now resting at 717.
As of October 2023, the average credit card utilization has seen a notable increase, rising from 33% to 35% compared to the previous year.
Alongside this uptick, American credit score statistics show there has been a concerning rise in the share of borrowers with a 30-day past-due missed payment against their credit accounts. These statistics underscore the financial strain many US households face, exacerbated by high interest rates and escalating prices.
The COVID-19 pandemic further intensified these challenges, albeit with a temporary buffer provided by government-supplied safety nets.
Many consumers managed to save cash and maintain manageable credit card balances during the height of the pandemic. However, with the gradual removal of stimulus checks and government-defined accommodation programs, these financial cushions have begun to dissipate.
Consequently, consumers find themselves grappling with the reality of diminished savings and heightened reliance on credit in a post-pandemic world. The result? Credit card balances in the US have surged to unprecedented levels, surpassing the $1 trillion mark.
What does the FICO credit score mean?
A FICO score is a credit score developed by the Fair Isaac Corporation (FICO).
Lenders rely on borrowers' FICO scores, along with other pertinent details from credit reports, to assess credit risk and make informed decisions about extending credit.
FICO scores range from 300 to 850. Scores between 670 and 739 are generally considered indicative of "good" credit.
FICO scores take into account data from five key areas, offering a comprehensive evaluation of a borrower's creditworthiness. These include payment history, current debt levels, types of credit used, length of credit history, and the presence of new credit accounts.
Not all credit scores are FICO scores.
Alternative scoring models, such as VantageScore, also play a significant role in the lending industry.
While VantageScore and FICO both utilize the 300 to 850 credit score range, they employ distinct tier classifications. For instance, what qualifies as a "good" score under FICO differs from the criteria set by VantageScore.
Here’s a breakdown of the FICO ranges:
Poor: 300 – 579
Fair: 580 – 669
Good: 670 – 739
Very Good: 740 – 799
Exceptional: 800 – 850
Here's how VantageScore breaks down its score range:
Very Poor: 300 – 549
Poor: 550 – 649
Fair: 650 – 699
Good: 700 – 749
Excellent: 750 – 850
Understanding the differences between a FICO score and a VantageScore credit score helps borrowers understand the diverse range of scoring models utilized by lenders.
How do credit scores differ across the US?
Just as credit score statistics differ from state to state, credit scores vary significantly across different regions of the United States, reflecting the diverse economic landscapes and financial behaviors present throughout the country.
American credit score statistics from FICO illustrate this regional disparity. Minnesota boasts the highest average FICO score, at 742, while Mississippi reports the lowest average credit score among its residents, at 680.
Despite the considerable gap between the highest and lowest scores, it's worth noting that both fall within the range of 'good' credit scores. This suggests a generally positive outlook regarding the overall credit health in the US despite the recent decline in the nationwide average score.
How do credit scores vary by age group in the US?
Credit score statistics offer valuable insights into financial habits and history.
They often reflect a trend where older consumers tend to have higher credit scores. This is largely attributed to their longer credit and borrowing history, which allows for a more established and reliable credit profile.
Many individuals wonder, "What credit score do you start with?" It's important to understand that there isn’t a set credit score that each person starts with. Instead, if you don’t have any credit history, you likely don’t have a score at all. That’s because your credit score doesn’t start at zero; in fact, the lowest possible score from FICO and VantageScore is 300.
When examining credit score statistics by age group, a notable pattern emerges.
Gen Z, encompassing individuals aged 18 to 26, has an average credit score of 680. On the other end of the spectrum, the Silent Generation, aged 78 and over, boasts the highest average credit score, standing at an impressive 761.
Here's a breakdown of the current average credit scores by generation:
Gen Z (18 to 26): 680
Millennials (27 to 42): 690
Gen X (43 to 58): 709
Baby Boomers (59 to 77): 745
Silent Generation (78+): 761
What factors influence your credit rating?
Your credit rating is influenced by various factors that provide lenders with insight into your financial responsibility.
These factors are categorized into five main areas:
Payment history: This reflects your track record of making timely payments on credit accounts and bills.
Credit usage: Also known as credit utilization, this refers to the amount of credit you're currently using compared to your total available credit limits.
Length of credit history: This considers how long you've had credit accounts open and the average age of your accounts.
Types of accounts: Lenders assess the diversity of your credit portfolio, including credit cards, mortgages, auto loans, and loans. If you're wondering if student loans affect your credit score, the answer is yes: the loan amount and payment history will impact your score.
Recent credit activity: This encompasses any new credit accounts opened, recent credit inquiries, and the frequency of credit applications.
While FICO is widely used across the US, some lenders may prefer VantageScore, which employs a slightly different approach to assessing creditworthiness.
Here's a comparison of the weighting of factors in FICO and VantageScore:
FICO scoring factors are currently weighted as follows:
Payment history: 35%
Amounts owed: 30%
Length of credit history: 15%
Credit mix: 10%
New credit: 10%
VantageScore scoring factors:
Payment history: 40%
Depth of credit: 21%
Credit utilization: 20%
Balances: 11%
Recent credit: 5%
Available credit: 3%
It's important to note that the significance of these factors may vary based on individual credit reports.
Additionally, both FICO and VantageScore do not consider certain personal characteristics when calculating credit scores, such as race, religion, marital status, age, salary, occupation, location, and soft inquiries on your credit report.
How can you improve your credit score?
Credit scores play a pivotal role in various aspects of daily life and financial freedom, influencing everything from securing a mortgage or credit card to determining auto insurance rates.
Given their significance, improving your score becomes paramount for achieving financial goals and stability.
While grappling with bad credit may present challenges, there are several strategies to improve your creditworthiness:
Make timely payments: Consistently paying your bills, loans, and credit card balances on time demonstrates reliability and responsibility to lenders.
Limit new credit applications: Avoid unnecessary applications for new credit, as each inquiry can temporarily ding your credit score.
Keep accounts open: Closing unused credit accounts may seem prudent, but doing so can decrease the average age of your accounts and negatively impact your credit score.
Utilize a credit score calculator: Online tools such as a credit score calculator or estimator can provide insights into your current credit standing and offer personalized recommendations on how to improve your creditworthiness.
Contrary to common belief, having no credit history can raise red flags for lenders.
Strategically building credit by responsibly using credit accounts can establish a positive credit profile. American credit score statistics reveal that around 19 million adults lack a credit score due to minimal credit usage or outdated credit history. A lack of credit history can hinder financial opportunities, as lenders rely on credit scores to assess creditworthiness.
Get expert financial advice
Unpacking credit score statistics sheds light on the ever-evolving landscape of financial health in the United States. By grasping the intricacies of credit scoring models and trends, you can make informed decisions to enhance your creditworthiness and secure a stable financial future.
Seeking financial advice from an expert financial advisor can provide you with personalized strategies to optimize your credit score and foster long-term financial stability.
Let Unbiased match you with an expert who can give you the guidance you need.
Senior Content Writer
Rachel is a Senior Content Writer at Unbiased. She has nearly a decade of experience writing and producing content across a range of different sectors.