We all have a vague understanding about credit score, credit reports and credit reporting agencies. Free credit monitoring services exist to check credit score. If the credit score number is high enough, then you have a good credit. It ranges from 300 to 850.
If you are at the lower end of the scale, you have a worse credit worthiness. Most lenders will shun you away or tack on a huge interest rate for the repayment risk they are taking.
Most friends ask me, hey I understand everything, but where do I stand against average credit? There is no uncomplicated answer to the question, “What is a good score in credit information report and where am I in the picture against the rest?”
Let’s take a look at different cuts of data, and compare credit scores across different demographics. These are interesting data that helps you figure out where you stand in terms of peers in your same demographic.
Average Score of Credit by range of Age Groups
|Age Group||Average Score of Credit|
|20 to 29||661|
|30 to 39||672|
|40 to 49||683|
|50 to 59||705|
|60 and above||750|
Average Age by Credit Score Tier
|Credit Score Tier||Average Age|
Source : Experian
Average VantageScore by State
Source : Experian
Average Score of Credit by Annual Income
|Yearly Income||Average Score of Credit|
|$50K to $75K||738|
|$30K to $50K||644|
Source : Wallethub
6 Factors That Influence Average Credit Score
You are now empowered with a lot of statistics at your fingertip to juxtapose your score of credit. What is the next best action for you? You need to understand how to upgrade your credit score. Start with basic comprehension on what components make up the credit score and their respective weights.
There are 6 major factors that influence average credit score
- History of timely payments: Checks your timeliness of paying back credit in the past
- Total amount of loan: the total dollar amount that you need to repay
- New recent credits: checks how many new credit accounts you’ve opened in the most recent time (avoids credit rotation)
- Mix of Credit types: the types of credit accounts that show up in your report. Most of us may have credit cards, auto loans or mortgages showing up here
- Utilization of credit ratio: the share of credit you’ve spent against the total credit given to you. Keep it under 30% to have the best result. If you are aiming for a really good score, have it less than 10%. Mine always stays at 1% as I’m shooting for the perfect 800!
- History of credit length: determines what is your oldest account and your average age of all accounts. Do not close your oldest cards since this factor gets a hit and your credit score drops. Downgrade to a no annual fee card version as much as possible instead of closing.
Credit Monitoring Significance
If you listen to sane people, they will ask you to pay close attention to your credit score. This does not just mean you check your score alone. You will have a close on any errors in your report. Also, look at why the scores change and take rectifying actions to improve them constantly. If you find any errors, report it to credit reporting agencies immediately.
You need to monitor the major reports of credit closely, Equifax (got hacked recently and in a class action lawsuit), Experian (heavily used by Chase) and TransUnion (heavily used by Bank of America). There are 3 different methods you can opt for
- Order free copies once yearly from AnnualCreditReports and take a look
- Free Credit Monitoring Service like CreditKarma, Chase Credit Journey and CreditSesame.
- Monthly subscription monitoring service – Use directly the credit reporting agencies paid service (highly recommended) or Lifelock
Finally, you can choose to go free or pay up, but never ignore the information. Any error on the report needs to be reported quickly to make it doesn’t destroy your credit. Knowledge of knowing what to do when it goes against you is critical. Now, I believe you are trained enough to spot the defects and improve your average credit score to good and eventually to excellent range.
I am a data analyst by profession who loves to crunch numbers at daytime and come home wondering how my passive income numbers for the day look like. I believe in being rich rather than looking rich. Follow me for Cryptocurrency, FIRE, Personal Finance, Credit Cards and Digital Nomad updates