What the average credit score? It is the most common question in the minds of people. You may also be wondering whether it is good enough to get approved for a loan or a credit account. Well, it looks and sounds simple but it is a little more complicated than we think.
There are a lot of different credit scoring models. Most follow a range of 300 to 850, but there are some exceptions also. The scores generated in each model is based on what’s on someone’s credit report can vary even if ranges are similar. So, it is difficult to say about the true credit score. But yes it can give you an idea about several things.
What is a Good Score?
Different models have different ranges. On the other hand, lenders make their own rules and decisions about what they think is acceptable or not. The scores generally range from 301 to 850, having categories from bad to excellent. The following will show the scores in different categories:
- Excellent Credit: 750+
- Good Credit: 700-749
- Fair Credit: 650-699
- Poor Credit: 600-649
- Bad Credit: below 600
It gives you an idea of how lenders are likely to view your applications. your application is considered by checking the score and comparing it with others. You can also build good credit by focusing more on what’s weighing them down and less on the numbers.
Mainly, credit scores consider these five major factors:
- Payment History
- Amount of Debt You Owe
- Length of Credit History
- A mix of Credit Accounts
- New Credit Inquiries
So, if you’re carrying a lot of debt then you may want to focus on paying some of your credit card balances down. If you have got many inquiries regarding credit on your credit report then you may want to hold off on applying for new credit for at least six months to a year.
And yes, you can improve an average credit score by the focus on paying your bills on time, maintain good and positive payment history with your lenders and add new accounts as you can handle them.
Role of Factors in Average Credit Score
What Factors Play a Role in Our Average Credit Score? You may think of these questions. Well, several factors are in play when you are examining your credit score. It is important to understand the factors which harm an average credit score and turn it into an inferior credit score.
- It gives a negative impact on your scores when you fail to pay your debts. You will find many things that can impact you if you are not careful. By missed or late payments to charge-offs, collections, and settled accounts, etc impact your credit score.
- It can create major credit bureaus if you missed payments or late payments of thirty days or more are reported. It can even remain on your credit reports up to seven years from the original date.
- A charge-off is when the lender decides to write the amount off as a loss because you are unable to pay them the money that you owe. Many times these charge off accounts will then be sold to a collections office and it will definitely leave a negative mark on your credit score. Even the collection can stay on your credit report for seven years.
Average Credit Score by based on Age
It is observed that the average FICO score actually improves with the age. Suppose if you are thirty years old, you may probably have a low score that a person who is older than you.
Customers show an average credit score of around 620 marks in their thirties because this age group needs more credit for major expenses than other age groups and other debts that they had begun to accumulate.
All these factors play an important role in the average credit of those having ages between eighteen and twenty-one who are just beginning to build their credit report. This age group finds it more difficult to gain credit initially.
Average Credit Score based on Income
When you analyze the average credit score based on the individual’s income, you will find that person has a relatively higher average score due to the higher income level. On the other hand, a lower income level may show a lower average credit score.
When it comes to an average credit score and income is credit utilization, it is the biggest factor in play. To maintain a good average credit score your credit utilization should always remain at under thirty percent
How to Improve Your Credit Score
If you are searching for the ways which can improve your credit scores then you should focus on paying your bills on time, maintain good and positive payment history with your lenders, to improve the credit utilization ratio you should pay down all your debt, and add new accounts as you can handle them. Try to minimize the hard inquiries on your credit files. Too many hard inquiries can hurt your credit scores.