Published in: Credit Cards | Dec. 31, 2018

The Average American’s Credit Score Has Never Been Higher

The average FICO credit score is at an all-time high. Here’s where the average consumer stands, and why you should strive to be well above average.

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The average American’s FICO® Score has hit an all-time high of 704 as of the latest available data. In addition, there are significantly fewer Americans with poor FICO® Scores and more with excellent scores than any other time in recent years.

Here’s an overview of the current distribution of FICO credit scores in the U.S., how to interpret the FICO® Score, and why it’s important to strive for the best score you can achieve.

The FICO® Score scale

FICO® Scores range from 300 to 850, and higher scores are better. To be clear, there’s no set cut-off for a good or bad FICO® Score -- in practice, it depends on who you’re trying to obtain credit from and how much money you want to be able to borrow.

Having said that, FICO does give consumers some general guidelines:

FICO® Score range

General classification

800 or higher

Exceptional

740-799

Very Good

670-739

Good

580-669

Fair

579 or lower

Poor

Data source: FICO.

The average FICO® Score in 2018

FICO analyzes Americans’ credit scores twice per year -- once in October and once in April. The results of the April 2018 analysis were recently released, and it was revealed that the average FICO® Score has jumped to an all-time high.

As I mentioned, the average FICO® Score in the U.S. is now 704. This is three points higher than the average score in October 2017 and is a significant 18-point increase since hitting a recent low in October 2009 in the wake of the Great Recession.

It’s also worth noting that while this is the overall average FICO® Score, there’s a big difference between age groups. Younger Americans tend to have less-established credit profiles, and therefore tend to have lower scores. Additionally, one major component of the FICO credit scoring formula is “length of credit history,” so this favors older consumers.

Age group

Average FICO® Score

18-29

659

30-39

677

40-49

690

50-59

713

60 and older

747

Data source: FICO.

More people have excellent credit and fewer have poor credit

Not only is the average FICO® Score showing continuous improvement, but the proportion of consumers with great credit continues to increase. Approximately 21.8% of Americans now have 800 or above FICO® Scores, up by nearly 4 percentage points since the post-recession low.

Conversely, fewer Americans now score in the lowest part of the curve. Just 4.2% of Americans have FICO® Scores below 500 now. In 2009, 7.3% fell into this category.

Why has Americans’ credit improved?

The rise in Americans’ FICO® Scores seems to be due to two main factors. For one, since the end of the Great Recession, consumer confidence has steadily improved and unemployment has dropped significantly. This means that more people have jobs that allow them to pay their bills on time, and more people are confident enough to make use of credit, the combination of which is a positive catalyst.

In addition, it seems that people are generally exhibiting more responsible credit behaviors. To be clear, this could be because of lessons learned the hard way during the tough times, but the trend is unmistakable.

For example, 42.2% of Americans have at least one hard credit inquiry on their credit report, a 100-basis-point drop from a year ago. This indicates that Americans are being more selective as a whole when applying for new credit.

Why an even higher FICO® Score is a smart goal

The average American consumer has a FICO® Score that is well within the realm of “good” credit. Put another way, the average consumer should have little trouble qualifying for a mortgage, auto loan, or for many credit cards, provided that their income and employment situation justify it.

However, there’s a difference between simply qualifying for these things and getting the best possible interest rates. As of this writing, for example, a borrower with an average (704) FICO® Score can expect to get an APR of about 5.72% on a 60-month new auto loan. On the other hand, a borrower with a score of 750 can expect an APR of just 4.44%. If you’re buying a $35,000 car, this translates to $1,271 in interest savings.

So, while the average American’s credit has improved, it’s still a smart financial move to strive to be well above average by building your FICO® Score into the “very good” or even the “exceptional” credit levels.

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