What Is The Average Credit Score?

There is one thing that everyone loves doing and that is comparing things with each other. This human trait is no different when it involves the credit score. Your score reflects your credit worth which in simple terms means  how good or bad you are in handling debt. Therefore, it is normal to be curious to know how your score measures up to the average.

Based on the latest figures from the Consumer Reporting Agency Experian the answer to what is the average credit score in 2011 is ............692. This score is based on the Fair Isaac credit scoring model which is the most common one used by the banks.

Definition of An Average Credit Score

What is the definition of an average credit score? The answer to this question will make more sense with a brief explanation of what a credit score actually is and its purpose. The credit score can be compared to your old school report. It is like a grading system that is used by the banks, insurance companies and other financial lending institutions to grade your credit risk.

Your credit risk is the lenders assessment of your ability to repay the money that you wish to borrow. Before a lender makes a decision on whether to approve your credit card application or determine the rate of interest to charge you they will check your credit score.

The score is based on a variety of financial data that relates to the length of your credit history, your payment history, the amount of debt you owe, the type and number of credit  accounts you use. Each of these criteria are weighted and contribute to the calculation of your score. The most important criteria are your payment history and the amount of debt you owe. These two combined make up 65% of your score.

What Is A Good Credit Score?

If Experian is telling us that a 692 is the answer to what is an avg credit score then, how does this compare with a good or bad credit score?

The FICO credit score range ranks them between 300 and 850 with 300 being the lowest and 850 being the highest credit score that you can obtain. It is difficult to determine whether one is good and the other is bad because in reality they do not really exist. Banks and lenders use different criteria to choose their perfect customers. Therefore, if one banks refuses someone because their rating is low another lender may consider that person a good candidate based on their own unique lending criteria.

It is more accurate to view scores from a lower and higher perspective. The best and most sought after score you can achieve is 850, however, a lower grade of 720 will get you the same interest rate on a loan  Although higher, 850 is not necessarily better if your a 720. In the current economic climate a 720  would be considered the best low score  you can achieve.

In this case the national average of 692 is just below what is considered a good score. This may seem like the difference of only a few points however, slightly higher interest rates over a 30 year mortgage can cost you several thousands of extra dollars.

How the Rest of Us Compare

As mentioned before we all like to compare ourselves with others. Recently this year Experian conducted a survey do find out the average credit score in each state in the US. Below is a snap shot of the 5 leading states that are above and below the national average credit score.

How To Raise Your Average Credit Score

If your score is close to the national average there are a number of things that you can do to improve your it as follows:

• Regularly Check Your Credit Report and Credit Scores

Mistakes in your  report can negatively impact your score.

You can obtain a copy of your credit reports from any of the 3 leading bureaus. It is best to get the 3 different reports because each one may contain different information about you. If you have been denied a loan you can receive your credit report for free.

Check your report for any mistakes or inaccurate information. You have the right to dispute any details that you can prove are incorrect. Also make sure your personal and contact details are up to date.

• Keep Your Debt to Credit Ratio As Low As Possible

Carrying too much debt can cost you as well as lower your score. Pay off your major debts as soon as possible. By proving to the lenders that you can pay off your debts responsibly you will see your score increase over time.

• Pay Your Dues On Time

Missed payments and defaults can drop your score like a stone. Ensure you pay your monthly installments and outstanding debts before the due date. If you find this difficult to do then learn how to budget so that you have enough cash left over to cover your payments. Set-up a money transfer facility with your bank so that your bills are paid out automatically.

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