Report: Most Americans Have Good Credit. What if You Don't?

by Christy Bieber | Dec. 4, 2019

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The Ascent's research shows the average FICO® Score in America is pretty good. But what can you do if your score is below par? 

A good credit score is essential, not just to get affordable financing but also because your credit is checked in many other situations before companies are willing to do business with you. 

Fortunately, credit scores in America have been on the rise. In fact, research from The Ascent revealed that the average FICO® Score in 2018 was 704, up 14 points from a decade before. And 704 is considered to be a good score. 

A smiling young man unpacking boxes on the floor of his new apartment.

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With a credit score of 704, it should be possible to qualify for most credit cards, personal loans, and other types of financing at favorable rates -- and to enter into other transactions such as renting a home or signing up for utilities when a credit check is required.

But what if your credit score is below average and isn't considered to be a good score? This can have serious consequences that affect many aspects of your life -- but you have the option to do something about the problem. 

How will having below-average credit affect you?

If your credit score is below the average, you may find it more difficult to find lenders willing to work with you. 

Depending on your score, though, you may still have some options. If you are trying to buy a house, for example, while most conventional mortgage lenders require a good credit score, it's possible to get a loan backed by the FHA with a credit score as low as 500. There are also credit cards and personal lenders that cater to borrowers with bad credit.

You need to be much more careful in borrowing when your credit score isn't great, though, as there are lots of predatory lenders offering bad credit loans with very unfavorable terms. If you'd have to pay a hefty fee or pay very high interest rate, you'd be better off avoiding taking out a loan until you can take steps to improve your credit

You should also be prepared to explain your below-average credit score in other situations where you might have to undergo a credit check. If a potential landlord wants to carry out a credit check, for example, try to account for problems on your credit report in a way that will ease their concerns about whether you'll pay rent on time. 

How you can improve your credit

If your credit score is below average, you absolutely can improve it -- but doing so will likely take time. 

Some of the steps you should take to try to boost your score include:

  • If there are mistakes on your report that are reducing your score, get them corrected.
  • Use credit in a responsible way by making small purchases on a credit card and paying off the debt on time each month. if you can't qualify for credit on your own, you may need a cosigner, or a secured credit card backed by collateral.
  • Ask creditors to remove a record of a late payment: You can write a goodwill letter to make this request, but there's no guarantee a creditor will do it.
  • Pay off debt. If your credit score is low because you have too much debt relative to the credit available to you, paying down your balance will raise your score.

If you have a loved one with good credit who has a credit card account in good standing, you may also want to ask that person to add you as an authorized user to their card. The positive credit history from that card will show up on your credit report and could help to increase your credit score. 

Improving a below-average credit score is possible

It's great news that the average credit score in the U.S. is a good one -- and it reflects a slow improvement in consumer credit scores over time. In fact, just a decade prior, the average credit score was 690, so Americans have improved a lot from 2008 to 2018. 

If you aren't yet one of the millions of Americans who has earned a good score, you have the option to make improvements to your credit that should make borrowing much easier and more affordable going forward.

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