How Does Your Credit Score Stack Up?

Illustration for article titled How Does Your Credit Score Stack Up?

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Despite the pandemic, Americans are paying down their debt, and the delinquency rate on loans is down, too—two factors contributing to the biggest jump in average credit scores since 2016. According to the most recent data, the average FICO score is 711, an eight-point increase from 2019, which nudges a lot of people towards the “very good” range of credit scores. Here’s how you might stack up.

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An uneven recovery

While many people have certainly suffered financially in the pandemic, a subset of Americans who retained stable income have been able to pay off their debt, helped along by stimulus checks and an extended pause in loan repayments.

According to Experian’s State of Credit 2020 report, many indicators look good: as with the FICO score, the average VantageScore has also increased, and is now 688; average credit card debt has dropped to $5,897; delinquency rates (3.8%) have been almost halved since 2019, and perhaps most crucially, credit utilization has dropped from 30% to 26%, on average. Credit utilization accounts for a 30% chunk of your total credit score, which tends to improves if your debt usage totals less than 30% of your total credit limit.

That said, Americans still have more consumer debt than ever before, too, holding a total of $14.56 trillion in debt in the first quarter of 2021. Most of this is due to mortgage debt, as low interest rates have fueled a surge in home buying. Despite the increased debt, people are apparently keeping up with payments and are paying off their credit cards—at least for now.

A higher credit score gets you more favorable loan terms

Credit scores are used by lenders to decided whether to give you a loan, as well as what the interest rate will be for that loan. The better your score, the less interest you’ll pay. As a general rule, your rate will be affected by which range of scores you fall into, from exceptional to very poor. FICO credit scores break down in the following manner:

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  • 800 to 850: Exceptional
  • 740 to 799: Very good
  • 670 to 739: Good
  • 580 to 669: Fair
  • 300 to 579: Very poor

If your score was “good” and it has improved over the last year, you might be closer to a “very good” status than you think (if you need to know your current score, most credit card issuers will provide it for free). If that’s the case, you might want to nudge it a little higher by following the tips in this Lifehacker post, especially if you think you’ll need to apply for a loan or financing later this year.

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And since your credit score is based on your credit report (an itemized summary of your financial activity), you’ll want to check that often. You can request free credit reports from each of the three major credit bureaus on annualcreditreport.com (normally you only get one free report every year, but a special pandemic-related provision allows you to get them for free, every week, through the end of April 2022).

This story was originally published in 2020 and updated April 21, 2021 with updated context and new information. 

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