Average Credit Score
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What is the Average Credit Score?
“What is the average credit score?” is the first thing many of us ask after viewing our first credit report. Credit scores are calculated on a day-by-day basis, so average credit scores are a good reflection of the state of the economy. A credit score is basically a computation of your ability to repay debt based on your past credit history. The numbers can be confusing so sometimes it is hard understanding where you stand. Knowing your credit score and how it compares on the national level is a great way to begin planning for future investments.
Most credit scores are based on the FICO formula, but depending on the credit institution they may have a different judgment.
In the United States the national credit score is around 680 which is not exactly terrible considering the increase of loans, mortgages, and bankruptcies that has been seen in the past decade.
Canada is doing slightly better, with the national credit score average being around 720. The average credit score tends to increase with each age bracket in both countries. Unfortunately, the way lenders view credit scores is not subjective to what the average credit score is.
Credit scores are based mostly on payment history and amount owed. Payment history includes all payments on credit accounts. Many people mistakenly believe that this includes things like utilities and phone bills, but those types of services can only negatively effect your credit score – they can’t make it any better. The amount owed is how much debt you have relative to the total amount of credit available. Obviously, if you are close to maxing out your credit cards you are going to be deemed higher risk.
Other factors will affect your average credit score as well. Some of these may include the length of your credit history and the age of your established credit accounts. Acquiring new accounts in a short period of time also heightens your risk category. Things like the mix of credit types you use and even how often you request a credit check can negatively impact your score!
Knowing your score is good, but keep in mind that every request made in a two week period is considered as just one check. So if you need to check your score many times, consider how long you will have to do it.
Don’t worry about what is the average credit score. The higher your score is the more money you will save. Being above average is not only brag-worthy, but it is a real factor in determining what you will pay for loans and how much money you can borrow in general. Don’t rely on just barely keeping your head out of the water; because the longer you live with bad credit the harder it is to get it back on track. Finding and correcting problems with credit is now easy with instant online credit reports so there is never any excuse for having bad credit.
