Living in an age of social media often means comparing ourselves to others. When friends post pictures of their new cars or shiny gadgets, we're eager to know how they came to afford those purchases. And while comparing ourselves to others isn't always productive, sometimes, it can help to know where you stand financially with regard to your peers.

Such is the case with credit scores.

Having good credit isn't just about bragging rights. Rather, it's about having more financial flexibility in life. When you have good credit, you can borrow more easily, and at the lowest rates -- and that opens to the door to long-term savings.

Man holding up credit score card


With that in mind, it should help you to know that the average American has a credit score of 700. And while that's a good score, it's definitely not a great one. Knowing how your credit score stacks up can help you better gauge your options for borrowing money in the near term, whether it's in the form of a mortgage, car loan, or credit card. Just as importantly, it can serve as the push you need to work on boosting that number.

What does your credit score actually mean?

Your credit score isn't an arbitrary number. Rather, it's based on five key factors:

  • Payment history (35%), which speaks to your tendency to pay on time
  • Credit utilization ratio (30%), which is the amount of available credit you're using
  • Credit history (15%), which is the length of time you've held your accounts
  • New accounts (10%), which are any recent accounts you've opened
  • Credit mix (10%), which represents the different types of credit accounts you hold

Studying this breakdown can help you better understand why your credit score is what it is, and what steps you can take to build up that number.

How does your score hold up?

First, let's get one thing out of the way. If you don't already know your credit score, stop what you're doing and get your hands on that information immediately. Ironically enough, you can't access your credit score via your credit report -- because that would be too simple. Rather, you'll typically need to pay a nominal fee to obtain your score from myFICO or a credit score service. You might, however, get lucky and find that information on your credit card or loan statement, so it pays to check.

Once you know your score, you can see how it compares to that of the typical U.S. borrower. Better yet, you can use the following chart to see whether your score is poor, outstanding, or somewhere in between:

Credit Score


Percentage of Consumers





Very good












As you can see, having a score of 700 puts you smack in the middle of the "good" category, but you'll still have a couple of notches to climb if you want a score that offers the most borrowing flexibility.

Improving your credit score

While a good credit score is nothing to be ashamed of, a great credit score can not only increase your chances of getting approved for a new loan or credit card, but help ensure that you get the best possible rates out there. Say you're applying for a $300,000, 30-year fixed mortgage. If your credit score is excellent, you'll be eligible for a 3.626% APR, which translates into a monthly payment of $1,368. A score that's good, but not great, will render you eligible for a 4.025% ARP and an associated monthly payment of $1,437. That's a $24,840 difference over 30 years, or 360 individual payments.

If you're committed to building your score, the best way to start is by accessing your free credit report and reviewing it for mistakes. An estimated 20% of credit reports contain errors, and cleaning up your record could conceivably boost your score overnight.

Another good way to raise your score is to focus on the key components that go into it -- namely, your payment history and credit utilization. If you make a habit of paying your incoming bills on time, you'll have a more favorable payment history to show for. Lowering your credit utilization ratio is equally important, and the best way to go about it is to knock out as much of your existing debt as you can. A ratio of 30% or less is ideal from a credit perspective, so aim to keep your outstanding debt at or below that limit.

Of course, paying off debt is easier said than done, so if you don't have the means to do quickly, you might consider taking on a side job to generate some instant cash. This is the sort of move that makes sense if you're applying for a mortgage in the not-so-distant future and want to secure the best possible rate. Another option is to transfer your existing debts to a credit card with a lower interest rate, and see if that helps.

Though a score of 700 won't necessarily prevent you from getting credit, it could end up holding you back if your goal is to snag the most favorable rates available. Remember, there's no such thing as having too high a credit score, so it pays to work on boosting yours as much as possible.