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by Lyle Daly | Updated July 21, 2021 - First published on Feb. 14, 2019
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Americans get plenty of flak for their financial issues, so it’s always nice to see some good news for a change. This piece of good news comes from FICO, which reported that the average FICO® Score for U.S. consumers is now 704, the highest it has ever been.
Here’s a closer look at what FICO found in its research, the factors that have helped consumers’ credit scores grow, and what all this means for you.
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This record high of 704 continues a trend of improving credit scores for American consumers. Scores were at their worst during the recession, with the average hitting a low of 686 in October 2009, but they have steadily gone up since then.
Here’s how FICO® Score distributions have changed over the years:
So, the most significant changes have been at the top and bottom of the spectrum. Fewer consumers have bad credit scores and quite a few more have high scores.
Another positive note is that this wasn’t just a particular age group doing well. Every age group saw its average score go up. Adults ages 50 to 59 saw their average go up 4 points, and all other age ranges saw their average go up 5 points.
The research shows that the number of consumers with collection agency accounts on file has been dropping, as is the number of consumers with at least one hard credit inquiry in the previous year.
But truth be told, the real reason credit scores are going up is one that the research didn’t quantify: People are more knowledgeable than ever about their credit.
An abundance of credit monitoring sites and apps have enabled consumers to track their credit scores on a month-to-month basis. You can easily learn all about what makes up your credit score, check which scoring criteria are helping and hurting your score, and find actionable ways to improve it.
Maybe you’re well above a FICO® Score of 704, or right in that good credit score range, or perhaps you’re not there yet. Here’s what you should work on based on your current situation:
You have a bad to fair credit score (under 670) -- Your main focus should be to pay all your bills by their due dates while paying down (and eventually paying off) any outstanding debts you have. A credit card can help you build your payment history here, but if you need to get one, you should stick to cards for bad credit or for fair credit.
You have a good credit score (670 to 720) -- At this range, you’ll want to continue paying everything on time. You should also keep your credit utilization as low as you can and avoid canceling credit cards if it will reduce the average age of your credit accounts. You can qualify for many different cards with good credit, so the best cash-back cards or travel rewards cards are good choices. Be selective when applying for cards, though, as too many hard inquiries will make it tough to improve your score.
You have an excellent credit score (above 720) -- You’ve more or less made it at this point. From here on out, it’s all about sticking to the good habits you’ve built. The only thing to watch out for is biting off more than you can chew. With all the most enticing credit cards and financing options at your fingertips, you may feel tempted to take out too many lines of credit. It’s OK to take advantage of your credit score, as long as it won’t end up putting you in a difficult financial situation later.
A higher average credit score is definitely a good thing for the country’s financial health, but it also makes it more important than ever to keep up with the average.
When so many people have good credit scores or better, it stands to reason that banks and creditors will start raising their standards accordingly. That means if you don’t have excellent credit already, you should prioritize building your credit and maintaining it once you’ve reached your goal.
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