Is Your Credit Score Better Than the Average American's?

The most important grade we receive in our lives doesn't come on any report card; it's our credit score. Creditors use this to decide what kind of credit card to offer us and lenders use it to set loan interest rates. Some employers use it to decide whether to hire you and landlords might weigh it when considering you as a prospective tenant.

Having an above-average credit score can help you stand out in all these areas, but most people don't know what an average credit score even looks like. Here's what the data says.

The average American's credit is looking pretty good

The average American had a credit score of 763 as of the first quarter of 2024, according to the Federal Reserve Bank of St. Louis. However, it's not clear what scoring model the bank used to calculate this.

FICO® Scores -- the ones most commonly used by lenders -- range between 300 on the low end to 850 on the high end. The following table breaks down the typical score ranges:

Under this system, an average score of 763 would fall in the "very good" range. But the Federal Reserve Bank's data says that it looked at credit accounts with current scores "between 150 and 950," so it appears it may be using a different scoring system.

Even so, 763 is still close to the upper end of this range, indicating that it's a pretty good score on whatever scale the Federal Reserve Bank is using. The data also shows that, apart from a dip due to the pandemic, average scores have been trending upward over the better part of the last decade.

How can you raise your credit score?

Unless you've got a perfect 850 credit score, there's always room for improvement. Some of the best steps you can take are:

• Pay your bills on time: Payment history is the biggest factor affecting your credit score. Set up automatic payments or notifications for yourself to avoid late payments. And talk to your lender if you're struggling to keep up with your bills to see if it can offer you any assistance.
• Limit how much you charge to your credit cards: Maintaining a credit utilization ratio of less than 30% helps keep your score high. The ratio represents the amount of credit available to you vs. the amount you use. For example, if your card has a $10,000 limit and you charge $1,000 to the card, your ratio is 10%.
• Limit how often you apply for new credit: It's best to limit your credit card applications to once every six months. Every time you apply, the lender does a hard inquiry on your credit report that reduces your score by a few points.
• Don't close cards if you can avoid it: Closing credit cards can lower your average account age, which hurts your score. There are times when you should close accounts, though. For example, if you have a travel rewards card with an annual fee you're not recouping each year, it makes sense to close it.

Above all, be patient. Boosting your credit score takes time, but it leads to a plethora of positive financial consequences.