September 6, 2017

Study: Average Credit Score

Read more about Credit Score

Your credit score can determine your future. A bad score can prevent you from owning a car or a home. It can even cost you your car, life, or auto insurance. Luckily, average scores are on the rise.

Read our report to learn the averages and compare them to where you stand. Your credit affects your entire life. Knowing how you stack up can help your future.

Average Credit Scores - How Do You Stack Up?

It seemed like we lived in the recession for a long time. The statistics show that consumers are doing better today, though.

  1. What is the average credit score?
    Our economy is continually on the upswing. Average credit scores prove this theory. With an average credit score of 673, we are almost to the 2007 high of 679. This is a sign that consumers are no longer financially overwhelmed. Consumers still use their credit. But they found a way to do so responsibly.

  2. What is the average credit score by age?
    Interestingly enough, average credit scores increase as we age. We gather it's because you get smarter as you get older. It's a bit of that "live and learn" theory.

    • 72-92-year-olds: 730
    • 51-69-year-olds: 700
    • 33-52-year-olds: 655
    • 22-40-year-olds: 634
    • 21 and younger: 631

  3. What is the average credit score for car loans?
    Of the consumers buying new cars, 86.9% of them financed the purchase. These borrowers have an average monthly payment of $493. They also have an average credit score of 711.

    Buyers making a used car purchase, however, only financed the purchase 54.7% of the time. They have an average monthly payment of $359. They also have an average credit score of 649.

  4. What is the average credit score for leasing a car?
    Some consumers prefer to lease a car rather than buy it. It doesn't seem to have anything to do with qualifying though. The average lessee still has a slightly higher average credit score of 715.

  5. What is the average credit score for a mortgage loan?
    Surprisingly, the average credit score on all closed loans for July 2017 was 724. This represents purchases and refinances. Breaking it down, 69% of the purchase borrowers had a score higher than 700. Of those refinancing, 65% had a score higher than 700.

Measuring Your Success

Knowing your credit score isn't enough. Next, you need to see how you compare to others.

  1. What is a good credit score?
    If you ask three different lenders, you'd probably get three different answers. There's no scientific answer to this question. In general, a score of 700 or higher is considered a "good credit score." Any scores above 750 are considered excellent.

  2. What is the highest credit score a person can have?
    The absolute highest credit score on the Fair Isaac Scoring Model is 850. According to the Fair Isaac Corporation, just a little over 1% of the population has achieved this goal. 200 million consumers have a credit score. This means less than 3 million have a perfect score.

  3. What is the lowest credit score a person can have?
    The absolute lowest credit score is 300. Luckily, according to TransUnion data, only 0.1% of the population with a credit score has a score of 300. Keep in mind, though, even a score as high as 550 could leave you without a loan. Lenders prefer credit scores of 620 before they consider loaning them money.

  4. How many credit bureaus are there?
    There are three national reporting agencies. They are Equifax, Experian, and TransUnion. You may find other regional agencies. However, they all pull from these three main agencies. Correcting issues on your credit reports should be done with one of these three companies.

  5. What is the difference between FICO and VantageScore?
    FICO scores were the only scores available until the last 10 years. Today, you may hear about VantageScore along with FICO. They both run on the same scale of 300-850.

    The largest difference between the two is how they weigh different factors. For instance, VantageScore takes late mortgage payments very seriously. So much so that it affects your credit score with greater force than any other late payment. The FICO model treats all late payments the same, no matter the type of debt.

  6. What makes up a credit score?
    You might be surprised to learn what goes into a credit score. It's more than making your payments on time. It's a combination of:

    • How well you pay your bills on time
    • How much of your available credit you use at once
    • How much credit you apply for at once
    • The age of your accounts (the older they are, the better)
    • The types of credit you have (installment, revolving)

  7. What is the difference between a soft and hard inquiry of your credit?
    Each time a bank or lender pulls your credit, it shows up as an inquiry on your credit report. Too many inquiries, and you could decrease your credit score. Not every inquiry counts, though.

    A hard inquiry is the one that affects your credit score. This occurs when a lender is serious about lending you money. Future lenders and those that pull your credit can see the inquiry for 2 years.

    A soft inquiry cannot be seen. It's more like a background check. You likely have frequent soft inquiries on your credit.

    If you receive preapproval letters in the mail for credit cards, you have had soft inquiries on your credit. Lenders don't need your permission for a soft inquiry. But it also doesn't show up on your credit report.

  8. How many points will your credit score decrease for an inquiry?
    Each new inquiry may cost you 5 points. If you have multiple inquiries at once, it could hurt your credit score. One or two stray inquiries, though, probably won't do too much damage.

  9. Does shopping around for a car or mortgage loan negatively affect your credit score?
    Every time you shop for a car loan or mortgage, lenders pull your credit. Each time they pull your credit, it shows up as an inquiry. This is as a service to you as well as future lenders. But multiple inquiries from the same type of lender may only count as 1 inquiry. The scoring systems take into account that most people shop around for the best deal.

  10. How does closing a credit card affect your credit score?
    You might think closing a credit card is a good thing. It can be. If you have a penchant for shopping and racking up credit cards, it makes sense. But it can make the average age of your other accounts younger. This could slightly affect your credit score.

    Only you know if it's right to close a credit card, though. If keeping it open is too much temptation, close it. You'll do more damage to your credit by maxing the card out than you would by closing it.

  11. Which credit-scoring model do mortgage lenders use?
    FICO and VantageScore continually come up with new scoring models. Today, FICO has Version 9 available. Mortgage lenders still use older versions of FICO, though. The only place you can see the score mortgage lenders use is by purchasing it from myFICO.com.

  12. What credit score model do auto lenders use?
    Auto lenders also tend to use FICO scores, but they use FICO Auto. This model takes credit card usage into strong consideration. They look at not only your balances, but also your habits over the last 2 years. They look to see if you pay your balances down/off. They also look at your credit utilization rate over the last 2 years.

  13. How can you improve your credit score?
    So you know you need good credit to get a loan. Luckily, there are ways you can increase your score if it's low:

    • Pay your bills on time
    • Take care of any incorrect information reporting on your credit report
    • Decrease your credit card balances
    • Pay off any installment loans you can afford to pay off
    • Watch how often you apply for new credit
    • Keep a good mix of revolving and installment debt

  14. How can you get a copy of your credit report?
    You can't correct what you don't know. You need to pull your credit report. You have access to one free report from TransUnion, Equifax, and Experian each year. You can only access it at AnnualCreditReport.com.

    If you want to spread it out, request one report from each agency every 4 months. This covers an entire year. If you prefer constant reports of your credit score, consider Credit Karma. They provide information from both TransUnion and Equifax on a weekly basis.

  15. Does your credit score affect your insurance rates?
    Your credit score affects more than your ability to secure a loan. It can affect your insurance rates too. Studies show that there is a direct correlation between a low credit score and insurance claims. In other words, the lower your credit score, the more likely it is that you'll pay higher insurance rates.

  16. Does your credit affect your chances of employment?
    Some states, such as Illinois, California, and Washington, don't allow employers to pull an applicant's credit. In the states where it is allowed, some employers look at it like a background check. Basically, they want a good idea of your reputation. If you have a lot of collections or bankruptcies, you may not be reputable enough for the job.

  17. How often should you check your credit report?
    At a minimum, you should take advantage of the three free credit reports you get each year. This gives you a credit report every 4 months if you space them out. If not, you can pull them all at once. Just make sure you do it on a yearly basis. This helps you stay on top of any errors that could negatively affect your credit.

  18. Should a person's credit score affect your decision to date them?
    You might not ask your date for his credit score, but it could inadvertently affect who you marry. Studies show that people with higher credit scores tend to have the strongest marriages. It goes without saying: you marry a man (woman), you marry their finances. This means good or bad. It pays to know what you are getting into before it's too late!

The Bottom Line

Your credit score is a work in progress. You may have highs and lows. It's all about balance and caring for your credit. Stay on top of what the bureaus report about you. It can affect many areas of your life, including those you may not have realized.

Sources and References:

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