Whether you have your heart set on a new rewards credit card, a mortgage loan, or some other type of financing, your credit score or scores will come into play when you fill out your application. Lenders use credit scores as a way to measure the risk of doing business with you, and to determine if loaning you money is a smart investment, or simply too risky.
Because credit scores matter so much to lenders, it’s always a wise move to pay attention to your own three-digit numbers. Knowing how your credit measures up relative to that of others can also be helpful. To that end, you’ll find this list of 10 surprising credit score statistics that you don’t want to ignore.
1. 65% Of the Points In Your FICO Score Have Nothing to Do With Whether You Pay Your Bills On Time
Full disclosure, this statistic is the hardest one for my father to grasp. He comes from an era where all you had to do was pay your bills on time, and you were golden. Times have certainly changed.
Don’t get me wrong. Paying your bills on time is a great habit where credit scores are concerned, and you’ll need to do well in the payment related categories to max out your FICO and VantageScore credit scores.
Yet, payment history is only worth around 35% of the points in your FICO scores. Approximately 65% of your credit score points come from other categories.
In reality, many factors influence FICO and VantageScore credit scores. These credit scoring factors fall neatly into the following five categories:
Your credit utilization ratio, for example, is one part of the Amounts Owed category from your credit reports. If your credit report indicates that you’re using a large percentage of your credit card limits, it could hurt your credit scores.
The length of your credit history is another example of information that impacts your FICO and VantageScore credit scores. Having older accounts on your credit reports will benefit you.
2. 69% of Americans Have a Good Credit Score
It does take some effort to earn and maintain good credit scores. But, according to the credit bureau Experian, many Americans are actually quite good at doing so.
The credit bureau reports that 69% of consumers in the United States have a good credit score. The number of consumers with good credit has been on the rise as well. Last year, only 66% of Americans were in the good credit score camp.
The definition of good credit can vary from one lender to the next. In general, a FICO score of 670 or higher is considered to be a good (or better) credit score range. Keep in mind, however, that what a lender considers to be good isn’t the same as where you rank nationally.
The average FICO credit score is 711, which is an all-time high.
Good credit comes with many benefits. A good credit score may give you a better chance of qualifying when you apply for loans, credit cards, and more. Plus, you can often leverage a good credit score to secure lower interest rates, better borrowing terms, and more affordable insurance premiums.
3. The Average FICO Score Hit a Record High in 2020
Despite the obvious challenges of 2020, the average FICO score in the United States has been on the rise. In October of 2020, FICO reported that the average U.S. FICO score had climbed to an all-time high of 711, as previously mentioned.
But, FICO scores don’t predict the future of the economy. A FICO score simply predicts the likelihood that an individual consumer will make a late payment (90 days late or worse) on a credit obligation in the next 24 months. That’s all credit scores are designed to do — nothing more, nothing less.
It may take some time before the financial strain of the pandemic starts to trickle down and affect consumer credit reports and FICO scores negatively. Government efforts to provide financial relief to consumers (including the CARES Act and the various stimulus payments) may also affect the timeline.
Of course, you can fully avoid negative information from hitting your credit reports by making at least your minimum payments each month. That way negative information will never become an issue for you and the average FICO score would continue to trend upward.
You should check your own credit reports to ensure they are void of negative information, which you can do for free each week at AnnualCreditReport.com.
4. An Estimated 9% of Credit Files Don’t Qualify For a FICO Score
You may not have known this, but not everyone has a credit report that will qualify for a FICO or VantageScore credit score. Credit scores are based on information found in your credit reports, with Experian, TransUnion, or Equifax.
But simply having those reports isn’t enough to guarantee that you’ll qualify for credit scores. If you’re new to credit or you haven’t had any active credit accounts for years, you may not receive a score.
To have a FICO score, your credit reports must meet FICO’s minimum credit scoring criteria. Specifically, your credit reports must:
- Not indicate that you’re deceased.
- Have at least one undisputed account that’s at least six months old.
- Have at least one undisputed account that’s been updated by a creditor in the last six months.
Most credit files qualify for FICO scores. But 9% of consumers with credit reports cannot meet FICO’s minimum score criteria. FICO refers to this demographic as the unscoreables.
Not having a score can be problematic because your credit applications are likely to have to be manually underwritten.
You cannot have a FICO score of zero as some people may have you believe. There is no numeric credit score zero — it doesn’t exist. All FICO and VantageScore credit scores fall between 300 and 850.
5. Less Than One-Third of Consumers Have Really Bad Credit
When you have subprime credit, it can be difficult and expensive to borrow money. But in 2020, the number of Americans with subprime credit scores declined.
Subprime credit is a term that means that your credit score isn’t high enough to qualify for the best or even near the best interest rates. The actual score threshold where you cross over into subprime is a moving target, as each lender sets its own cutoff point between what it considers to be prime and subprime credit scores.
For example, some lenders may consider anything below 700 to be subprime while others consider scores that fall below 600 to be subprime. Generally speaking, however, a FICO score that falls below 670 is considered a subprime credit score.
In 2020, only 30.9% of U.S. consumers fell into the subprime credit score category down from 33.8% of consumers with subprime FICO scores the year before.
Still, if you have bad credit you are by no means alone in your struggles. Although less than one-third of Americans have subprime credit, 30.9% still represents millions of people when you consider that the three credit bureaus have credit data on more than 220 million consumers.
6. Over 50% of Americans Check Their Credit Score Monthly
Keeping an eye on your credit reports and credit scores may help you earn or protect a good credit rating. So it’s a good thing that many Americans do, in fact, check their credit score frequently.
According to TransUnion, over 50% of U.S. consumers check their credit score at least once a month. Most of those consumers — 87% to be exact — access their credit scores free of charge.
The Fair Credit Reporting Act (FCRA) gives you the right to claim a free credit report from all three major credit bureaus once every 12 months. But these free reports don’t include your credit scores.
Still, there are many ways to check your credit scores for free.
- Your credit card issuer may give you free FICO or VantageScore credit score access as a cardholder benefit. Check your monthly statement or log in to your cardmember account online to confirm.
- Discover offers free FICO scores to anyone — whether or not you’re a cardmember.
- Numerous websites offer free credit score access in exchange for letting the company market financial services to you.
NOTE: The credit bureaus are allowing free weekly credit reports, although they are not required to do so by law. Those free weekly reports are available only at AnnualCreditReport.com.
7. Over 70% of Consumers Who Regularly Check Their Credit Score Feel Empowered as a Result
A study by Javelin Strategy & Research (sponsored by TransUnion) reveals that people who check their credit score each month feel more confident about their overall financial health. Of those surveyed:
- 71% felt they had control over their day-to-day and month-to-month finances.
- 58% had a habit of routinely putting back cash to pay large, periodic bills.
- 54% believed they were on track to reach long-term financial goals.
- 53% had the financial freedom to make choices that let them enjoy their lives.
- 52% felt prepared financially to handle an unexpected financial emergency.
Monitoring your credit scores can alert you when there’s a problem with your credit reports. A sudden credit score drop could indicate a problem like identity theft or a new derogatory entry appearing on your credit reports.
An unexpected decrease in your credit score may also stem from credit reporting errors, which you’ll want to dispute with the appropriate credit reporting agency. Or a lower credit score could be a result of a mistake you made as well — such as a missed payment or higher credit card utilization.
If you check your scores monthly and notice a sudden downward change, it’s a signal that you need to investigate further. Check your credit reports as soon as possible to discover the source of the problem.
8. People Who Are 75 and Older Have the Highest Average FICO Scores
The average FICO score has increased across the board for consumers over the age of 18 years old. Experian refers to these consumers as credit active.
Consumers over the age of 75, known as the silent generation, currently have the highest average FICO score of any credit-active generation. The average credit score for these consumers is 758, compared with 757 in 2019.
Millennials had the largest average FICO score increase between 2019 and 2020. These consumers, between the ages of 24 and 39 years old, saw the average FICO score in their age bracket increase by an impressive 11 points.
9. The Average FICO Score Increased 3% In the Last Decade
Between 2010 and 2020, the average FICO score in the United States has been on a steady rise. Experian reports that during that time, the average score increased by 3% (21 points).
Twenty-one points may not sound like much, but depending on your personal scores, it certainly indicates better credit risk to lenders. Many lenders calibrate credit scores such that every 20- to 40-point score increase indicates a 50% reduction in your odds of making a late payment.
The technical term for this is Points to Double the Odds (PDO). The point being, an increase of 21 points is a really big deal for consumers.
Not only has the average credit score been improving, but much of that improvement occurred recently. 2020 proved to be a banner year for consumers in terms of FICO scores. The average FICO score increased by 1% — 7 points — between 2019 and 2020 alone.
Only time will tell if the recent credit score surge holds. Several factors may be helping to boost consumer credit scores at this time.
Temporarily increased unemployment benefits in 2020, for example, may have made it easier for out-of-work consumers to stay current on their bills. Government-mandated relief options for student loans and federally backed mortgages also helped millions of Americans avoid late payments (at least temporarily) on certain credit obligations. As relief measures begin to expire, consumer credit score trends may adjust.
10. Less Than 2% of Consumers Have a Perfect Credit Score
Most FICO scores are scaled with a range that starts at 300 on the low end and is capped at 850 on the high end, although there are some exceptions. The higher your credit score climbs on that range, the lower your credit risk. A higher score means that you’re less likely to pay your credit obligations 90 days late, or worse.
For some, the idea of chasing the perfect 850 FICO score is enticing. However, earning a perfect credit score is no easy task. According to Experian, only 1.2% of consumers currently hold this honor.
But just because you have 850 today doesn’t mean you’ll have 850 tomorrow, or even later today. As the data on your credit reports change, it’s likely your scores will change as well.
An excellent credit score can work in your favor, of course. It will help you qualify for attractive credit card offers, loans, and competitive interest rates. But you don’t need perfect credit to unlock these types of benefits. In fact, you don’t even have to be close to perfect to score the best deals from lenders.
In general, a consumer with a FICO score of 760 or higher will qualify for the most attractive financing offers available from lenders. The best-published interest rates for mortgages are for those with a credit score of 760 or higher. The best-published interest rates for auto loans are for those with a credit score of 720 or higher.
So, while working toward a brag-worthy 850 score may feel exciting, it’s not really necessary.
Improving Your Credit Scores
It’s in your best interest to keep your credit scores in the best shape possible. Good credit comes with too many perks and savings opportunities to ignore.
Start by checking your credit reports often and keeping an eye on your information. When you review your credit frequently, you can more easily spot problems — like identity theft — and track your credit-improvement progress at the same time.
Next, make sure you’re following best practices where your credit is concerned. On-time payments and low credit card utilization are both a must.
Finally, if you don’t have any credit, opening a credit card and using it responsibly may help you as well. You may also want to consider some out-of-the-box strategies like asking card issuers for a credit limit increase or having a loved one add you as an authorized user on an existing credit card.