Published in: Credit Cards | Nov. 24, 2019

People in These 9 States Have the Best Credit Scores in the Nation

By:  Kailey Hagen

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Is your state one of them?

A good credit score is like a VIP pass that will have lenders and credit card issuers rolling out the red carpet. Individuals with good credit have much higher odds of approval when they want to borrow money. And their interest rates are usually lower, which saves them hundreds or even thousands of dollars over the course of a loan term. Those with fair or poor credit may have to pay more in interest, or even be denied outright. 

As with individuals, some states tend to have better average credit scores than others. In The Ascent's latest research report on average credit scores in America, we found nine that stood above all the rest.

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The states with the best credit

The study looked at the states with the highest VantageScores. VantageScores and FICO® Scores are the two most popular credit scoring models in the nation. VantageScores range from 300 to 850 with a higher score representing better credit. Only the following nine states had an average score of 700 or better:

  1. Minnesota -- 713
  2. South Dakota -- 707
  3. Vermont -- 705
  4. New Hampshire -- 704
  5. North Dakota -- 703
  6. Massachusetts -- 703
  7. Wisconsin -- 701
  8. Nebraska -- 701
  9. Iowa -- 700

Curiously, all of these states fall in the Midwest or New England. It isn't easy to pinpoint why those living in these regions appear to have better credit than the rest of the nation, but we can make some reasonable assumptions about what they don't do. It's unlikely that many of these individuals make late payments or max out their credit cards every month because doing so can quickly bring down your credit score. They appear to have a healthy relationship with credit and only use it as needed.

What's a good credit score?

You might be wondering what the cutoff is for a good credit score. The truth is, it depends on your lender. Each lender has its own criteria for what it considers an acceptable credit score, but VantageScore defines a score of 661 to 780 as prime and a score of 781 to 850 as superprime. Some lenders might be willing to work with you even if your credit score falls below this range. But if you want the best odds of approval and the lowest interest rates, you should aim for a credit score in the 700s or above. 

The FICO credit scoring model uses the same scoring system, where 300 represents the lowest possible score and 850 the highest. It considers a score of 670 or above to be good, but again, it's ultimately up to your lender to decide what's acceptable in a given situation.

How to raise your credit score

If you already have a high credit score, that's great. If not, don't get discouraged. It takes time, but you can improve your score. Paying all your bills on time is the most important step you can take because payment history is the most important factor in your credit score calculations. A single late payment can drop an excellent credit score by 100 points or more, and it remains on your credit report for seven years.

The second-most important factor in your credit score is your credit utilization ratio. This is the ratio between how much you charge to your credit cards each month and your credit limit. Using more than 30% of your available credit each month can hurt your credit score because it indicates that you cannot support your lifestyle without borrowing a lot of money. 

Lowering your credit utilization ratio isn't hard, though. You could charge less to your credit cards or spread your spending around so you're not charging more than 30% of your credit limit to any single card. You could also try paying your credit card bill twice per month. The credit bureaus only see your final balance at the end of the month, so by paying once halfway through the month and once at the end, it will appear as if you only charged a fraction of what you actually did.

Beyond that, limit how often you apply for new credit and don't close old credit accounts. Then just give it time. Credit scores are meant to give lenders a window into your long-term financial habits, so it'll take months before you see any significant changes, but it's worth the effort. Once your score improves, you won't have to worry about your credit card or loan applications being denied and you'll save yourself a ton of money in interest over your lifetime.

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