The average American's FICO credit score hit an all-time high of 699 in 2016.
While the upward trend is encouraging, a score above 700 is widely considered to represent a "good" credit history. So the unfortunate truth is that the majority of Americans don't have good credit.
Why does having good credit matter? People with good or better credit can more easily reach their financial goals.
For starters, they qualify for the lowest mortgage rates. The mortgages rates offered to those with excellent credit scores can be up to 1.5 percentage points lower than the rates offered to borrowers with poor credit. For an average homebuyer, that difference would translate to savings of $102,000*.
A high credit score also helps consumers land the most lucrative credit card offers, from big credit card sign-up bonuses to balance-transfer credit cards that can help pay off debt faster during the 0% introductory APR period.
Clearly, it pays to improve your credit score, and doing so is a long-term investment in your financial security that can help you get ahead of your bills faster or save more money to invest for retirement.
FICO credit score basics
Chances are, if you're looking to borrow money, banks will put your FICO score under the magnifying glass.
The factors of your FICO score can be broken down into five categories and are weighted as follows:
- Payment history: 35%
- Credit utilization: 30%
- Length of credit history: 15%
- New credit: 10%
- Credit mix: 10%
With this all in mind, we've compiled a handful of some of our most valuable credit-score articles and videos, which can help put you on the path to improving your credit score. The following articles focus on simple, actionable steps you can take to increase your credit score. They also highlight credit cards that might be a good fit for you.
- Best Credit Cards for Good Credit
- Best Credit Cards for Excellent Credit
- 3 Things That Will Tank Your Credit Score
- 3 Credit Score Facts That May Surprise You
- I Have a Perfect Credit Score and You Can Too. Here's How I Did It
- Your Credit Score. Everything You Need to Know
- Why Do I Have 3 Different Credit Scores?
- Does Paying Off Your Credit Cards in Full Each Month Hurt Your Credit Score?
- 1 Credit Score Tip Some People Get Wrong
- This Regulatory Change Means a Credit Score Boost for 12 Million Americans
- 1 Thing You Probably Didn't Know About FICO Credit Scores
- 3 Things Not Counted in Your Credit Score
*Average new home purchase of $309,000. Current 30-year fixed mortgage rate of 4.31% versus 5.81%. Mortgage rates as of March, 2017. The Motley Fool has a disclosure policy.