Unhappy With Your Credit Score? How It Compares to the Average Credit Score in Your State
Some Americans proudly boast about their credit scores; others get anxious thinking about them.
As a nation, Americans appear not to be afraid of taking out debt. By the end of 2023, we accumulated $17.1 trillion in consumer debt, a 4.4% increase from 2022.
That said, the interest rates Americans received on that $17.1 vary greatly. One’s credit score has a huge impact on interest rates. As a WalletHub study shows, residents in certain states have dozens of points difference in their credit scores compared to others.
Measuring Credit Scores
WalletHub analyzed Experian data, ranking the states with the best and worst credit scores. The good news? From a nationwide perspective, the average American has a credit score of 715 based on the FICO score model. That falls under FICO’s “good” category.
For reference when looking at the following state rankings, these are the five different FICO categories and the credit scores that pertain to them:
- Exceptional (800 – 850)
- Very Good (740 – 799)
- Good (670 – 739)
- Fair (580 – 669)
- Poor (300 – 579)
To put these numbers into perspective, according to Experian, Americans looking to buy a house should have a FICO score of at least 670. However, some people might be able to get away with purchasing a home with a FICO score as low as 500; they’ll just likely have a harder-on-the-wallet interest rate.
With that in mind, these are the average credit scores in each state, starting with the worst scores. How does your credit score stack up to them?
Crunching the Numbers
It’s one thing to see these credit score averages; knowing how they translate to real-life circumstances is a whole different ball game.
The Financial Industry Regulatory Authority (FINRA) took it upon themselves to present an example of how much interest people with two different credit scores may end up paying for a mortgage. They used a $200,000 fixed-rate thirty-year mortgage and a customer with a credit score between 760 – 850 and another with a score between 620 – 639.
Bearing in mind FINRA performed these calculations when interest rates were lower, the person with better credit might have received a 3.307% interest rate, whereas the person with worse credit may have received a 4.869% interest rate. That means on a monthly basis, the person with a lower credit score would have paid $184 less per month for their mortgage.
That might not sound like a lot. But over the course of 30 years, that adds up to an additional $66,343 that the person with bad credit would have to pay.
Credit Score by Age
There’s a clear correlation between age and credit scores. Statistically, as a person ages, there’s a higher likelihood that their credit score will increase.
Just how much of an increase one can expect, you ask? Based on Experian’s data, people in the 18 to 26-year-old age group range have an average credit score of 680. By the time one is 78 years and older, that number jumps up to 760.
One reason for this is that the length of time you’ve been building your credit history is part of the calculation that goes into credit scores. That alone accounts for about 15% of a credit score.
Other circumstances that typically cause one’s credit score to increase with age are that people tend to become more financially responsible as they get older and that time can heal poor financial moves that caused an otherwise poor credit score.
How To Improve Your Credit Score
Contrary to what some people believe, having no debt or loans of any kind can actually decrease your credit score. This is one of many examples of situations one must consider if they’re trying to build up their credit score.
Some of the ways you can improve your credit score include:
- Asking for higher credit limits
- Paying minimum balances on time or early
- Becoming an authorized user on (a financially responsible) someone else’s credit card
- Disputing items on your credit report that shouldn’t be there
- Avoiding hard inquiries
If you have a long way to go with increasing your credit score, here’s some good news: It’s easier for people with low credit scores to see larger boosts to their score than people who are already in the “good” and “excellent” categories.
How Much Money It Takes To Be in the Top 10%
Whether you dream of being in the top 10% or think you might already be there, one thing is certain: The income a household makes to be in the top 10% club varies by state. Here’s how much you need to make to have a higher income than 90% of Americans.
How Much Money It Takes To Be in the Top 10% by State
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