Is Your Credit Score on Par with the Average Credit Score

Quick question: What is the average U.S. credit score? The answer is 704 in 2018. So, did you get close? If you were far off, that’s okay.

It is not easy to make an accurate guess without knowing a few things. First, you need to have some idea of how the economy is doing. And of course, you also need to know what the full range of credit scores is.

So, what is your credit score? Are you in range of the average or above? A good score is above 700 and an excellent score is above 760. Focus on always being near the national range. You never know when you may need a high score to acquire a mortgage or large purchase. It may not be on your radar until that emergency happens and you are denied credit.

Don’t fall into the credit valley of no approvals or extremely high-interest rates. It appears to be unfair but after lenders lost so much to delinquencies for non-payments and late payments, taking chances on consumers are in the past.

If you find yourself in this unfortunate demise, it might be time for a financial reboot. Your finances may be out of control, so prepare to take a Financial Pause!

Credit Score Impact

On the first point, credit scores are impacted negatively during a declining economy. Therefore, it makes sense to do what you can to maintain or improve your score, in spite of a sluggish economy. Get as close to 700 and above as possible.

Next, the very important range of credit scores. Keep in mind that a perfect score is 850, and the worst possible score is 300. Doing some quick math tells us that the average of those two numbers is 575. Although we know how to calculate averages, the current national average credit score is 704.

Consumer Responsibility

Especially after the Great Recession of 2008-2009, people are trying to pay their bills and pay them on time. Perhaps that can be attributed to a greater American spirit or individuals truly understanding the impact that timely bill payment has on their credit scores.

Whatever the reason, the country’s credit environment is better than we thought.

Evidence shows the actual average of 704 is significantly higher than the statistical average of 575. Even CNBC has noted this improvement. They reported that in 2018, the average national credit score hit 704 for the first time.

Get that Credit Score Up

Ready for more relevant information… Lenders do not disclose what the cutoff point is for different terms of loans. Not to mention changes can occur at any time, and for a variety of reasons. So what may have worked a few years ago, will not cut it this year.

For example, while you easily secured a good loan with a credit rating of 680 (24 points below average) just two years ago, it would be very difficult to get those same terms today.

With all the different variables in place, what kind of score do you usually need to get the best terms today? Since each lender is different, you will need an overall credit score of 720 or better to ensure you will get the best terms. Yes, that is 16 points above the current average. Do your best to achieve the best credit score that you can.

The Great Recession decimated so many financial institutions. Therefore, lenders may have more stringent standards because of the economy due to fear of a repeat of a financial demise. Or, they are just playing it safe and categorize everyone as higher risk than they used to. Of course, the reason is not as important if you can’t get the best terms for a loan, or worst you can’t get a loan at all.

More Credit Facts

Did you know that each state has its own average credit score? This means lenders have different numbers to work within each area. Here are some of the states where the average score is 700 or higher according to a 2019 article in the Balance: Minnesota, New Hampshire, Vermont, and South Dakota. And these States have the lowest averages (around 647 to 659): Mississippi, Louisiana, Alabama, Georgia, Nevada, Oklahoma, Arkansas, South Carolina, West Virginia, and New Mexico.

Finally, for a financial peace of mind, you should be diligent with maintaining the best credit score possible. Re-evaluate your budgeting and bill paying mechanisms.

Request your credit report every year. There are various services to use such as Annual Credit Report, Credit Karma or go directly to each to each credit reporting service, Equifax, Experian or Transunion. Based on your credit picture, restructure your financial situation where necessary.

You should then be in a better credit bracket to achieve your dreams and goals.