The simple answer according to FICO is 715. But average means different things when it comes to one’s age, where they live, and how much money they make. There are also so many scoring models out there, it’s hard to tell where one stands. One thing for certain is getting yourself in a position to have a strong, healthy credit score can have a great financial impact in life. Not only borrowing and getting the best possible interest rate. But credit scores impact insurance premiums, and even shows potential employers your “hiring risk.” Credit scores… like them or not…. they can enhance your overall financial well-being or feel like ball and chain holding you back.
What types of scoring models are in use?
There are two main players in credit scoring models. Fair Isaac (FICO) and the Vantage scoring model that was created in partnership by the big 3 credit bureaus. Vantage scoring models are the generally accepted models of most all credit monitoring services. However, they are making strides in replacing the FICO model in many areas of lending. Below is an example of how factors are weighted differently with each model.
FICO® vs VantageScore®
FICO and VantageScore are examples of credit scoring models.
The factors that make up FICO credit scores are:
- Payment history: 35 percent
- Amounts owed: 30 percent
- Length of credit history: 15 percent
- Credit mix: 10 percent
- New credit: 10 percent
The factors that make up a VantageScore are:
- Payment history: 40 percent
- Age and type of credit: 21 percent
- Percent of credit used: 20 percent
- Total balances/debt: 11 percent
- Recent credit behavior and inquiries: five percent
- Available credit: three percent
How does age factor into a credit score?
Short answer_ it doesn’t. But there are statistics that show a correlation of scores due to one’s age. Whether they factor in maturity, understanding of credit, and time to build a strong profile, age does seem to have its privilege on the overall average score.
. Silent Generation: 760
. Baby Boomers: 742
. Generation X: 706
. Millennials: 687
. Generation Z: 679
Geography and credit scores.
Studies have shown that scores in various States are quite different. For example, Minnesota has the highest average credit score at 742. Mississippi happens to have the lowest credit score average with 680. How does your state rank? Here’s a link to Experian’s ranking by state.
Does income affect credit scores?
Unfortunately, the answer to this is yes. But remember, these are averages. There are many people that don’t make six-figure incomes that have great scores. Honestly, it’s the understanding how to get and maintain good credit. Those with higher incomes, more often than not, have the ability to gain credit and better have the means in which to pay off their debts quickly. Here’s a breakdown of how the averages play out.
. Lower Income: 658
. Moderate Income: 692
. Median Income: 735
. High Income: 774
How do I better my credit profile?
Knowing how the different scoring models above and the factors they use to determine the scores is half of the battle.
. Keep your balances on your credit cards at 10% or below your credit limit.
. Pay all of your accounts on time.
. Have both Revolving accounts and Installment accounts on your credit report.
. Stay away from applying for too many accounts at one time.
. Keep your cards open and active for as LONG as you can. Credit history will help get you even better scores.
. Become an authorized user on a trusted family member’s credit card (in good standing).
How do I know where I stand in the eyes of potential employers and insurers?
There is a credit monitoring service that I use. It has access to that data for Car Loans, Insurance, and Hiring risks. Feel free to check it out at Credit Armor.
At the end of the day, realize that building credit is a journey. It’s not an overnight process. Use these tips to help you build a strong credit profile. It takes discipline. But when you get your scores to where they need to be, many doors open up and lenders are much more willing to help you with your financing needs.
