Congrats, America, your credit score has gone up. At last count, the average credit score in the United States was 704, an all-time high, according to FICO, a credit scoring company.
If you're below that score, though, don't freak out: The average credit score incrementally goes up with age, which makes sense as credit history is one of the big factors layered into your score. Suffice to say, there's a difference of 88 points between young adults and those aged 60 and up. Here are the average scores, broken down by age brackets:
- 18-to-29: 659
- 30-to-39: 677
- 40-to-49: 690
- 50-to-59: 713
- 60 and up: 747
Worth noting, though, is that—across all age brackets—the average FICO score went up.
Since your credit score can affect you on so many levels—everything from interest rates on loans, to car insurance rates, to whether you need to put money down for utilities—understanding where you stack up credit-wise and how to continually grow your score is crucial to your financial health.
As far as home-buying goes, an average credit score will help you qualify for a mortgage, but a score above 760 will secure the best interest rates and translate to the lowest mortgage payments, says Richard Barenblatt, mortgage specialist at Guardhill Financial Corp. in New York, New York.
Why credit scores are improving
FICO scores in the United States has been on a steady incline since October 2009, when the average credit score dropped down to 686 post-recession. For the first time ever in April 2017, the average FICO score reached a milestone 700 and has since inched its way up to 704.
So, what can we credit for making American credit competitive?
According to FICO, fewer consumers have collection accounts dinging their scores, which is helping drive up the higher average. In April 2018, 23 percent of consumers had one or more collection agency accounts on file, compared to 25.8 percent in 2017. Payment history makes up about 35 percent of the overall FICO score calculation, according to the company.
Also, fewer consumers are searching for credit, as 42.2 percent of people made one or more hard inquiries in the last year, which marks a four-year low. (Quick explainer: Checking and monitoring your credit doesn't count as a hard inquiry; but when you're searching for new credit accounts and doing things like applying for a car loan, general credit card, or a store credit card, those do count as hard queries).
Some lesser-known tips for boosting your own credit
You already know paying your bills on time, not letting bills go to collections, and not maxing out your credit cards are good credit habits. But you might be curious what other credit-boosting strategies you can employ, especially if you're aiming for a higher-than-average credit score or even the elite 800 club.
Here are a few expert tips:
- Spread your expenses over different cards. The key here is to not go above 30 percent of each card's spending limit. "It's okay to carry a balance as long as you pay the minimum amount by the due date every month," Barenblatt explains.
- Don't apply for new loans when you're shopping for a home. New credit cards, car loans, or installment loans could temporarily drop your score, something you don't want to happen when you're in the pre-approval process or getting close to closing, Barenblatt says.
- Avoid closing out credit cards. "Having a card with a longer history can help buoy your score," says Kimberley Palmer, personal finance expert at NerdWallet, a personal finance site. Even if you're not using the credit card you opened in college, it's worth keeping it open and making and paying off purchases, even small ones.
- Have your name on your parent's credit card. "If you're just starting out with credit, you can become an authorized user on your parent's card to help build your credit score, too, as long as your parent is willing to add you," says Palmer.
One final note: FICO recently announced that it will be testing a new "UltraFICO" score that factors how you manage cash and could potentially help increase the scores of those who have so-so credit. So, habits like keeping a few hundred dollars in your checking or savings account, not overdrawing your account, and paying your rent and utilities on time could help bump up your score.