Published in: Research | March 26, 2020
By: Christy Bieber
Credit scores affect virtually all aspects of financial life. Landlords, utility companies, cell phone service providers, cable and internet companies, and even employers check credit scores. And both credit histories and credit scores are often used as a proxy to judge whether you are a trustworthy customer or employee.
Lenders, as well, use credit scores to make decisions on whether to allow a person to borrow money and what interest rate and loan terms should apply.
What many people don't realize, however, is that there are actually multiple credit scores, including the following:
Early models of the VantageScore system scored consumers on a scale of 501 to 990. Today, however, both FICO and VantageScores are on a scale of 300 to 850 with higher scores preferred. A score of over 740 is generally considered to be a very good score.
Knowing your score is important to assess whether you're a well-qualified borrower who is likely to be approved for loans at favorable terms, or whether there is room for improvement.
(Not sure what your score is? You should check it soon.)
It's also helpful to understand how your score compares to the average, both in the United States generally and for people within your demographic group.
The data below on the average credit scores in America will tell you everything you need to know to see where you stand when it comes to your credit.
The average FICO® Score in the United States has been steadily increasing for the past decade.
As the below table shows, there was a 19 point increase in the average score from 2009 to 2019. In 2019, the average FICO® Score hit 706, which is classified as a good credit score.
As the chart below shows, fewer than 1 in 5 consumers have a score classified as Very Poor, while the vast majority of Americans have at least fair credit.
FICO® Scores tend to climb with age. In fact, Americans 60 and over have average credit scores that are 87 points higher than Americans aged 20 to 29.
This is unsurprising as length of credit history is a key component in both FICO and Vantage scoring models. Older Americans have also had more time to develop positive payment histories and to become more financially stable, so missed payments become less likely.
In 2019, the average VantageScore in America hit 682, a two-point increase compared with 2018. Older data from 2018 also shows the majority of Americans have a VantageScores of 661 or higher and are considered prime or super-prime borrowers (this detailed breakdown has not yet been made available for 2019 scoring data).
While VantageScores and FICO® Scores use the same scoring scale, the scoring model is different.
VantageScore considers six factors including payment history, type and age of credit, percent of credit limit used, total debt balances, recent inquiries and credit behavior, and credit available.
FICO focuses on payment history, amount owed relative to credit available, length of credit history, new inquiries, and the mix of different kinds of credit you have.
Average VantageScore data confirms that age correlates with higher average credit scores. The Silent Generation has an average VantageScore that is 90 points higher than the average credit score among those in Gen Z.
Both age and gender play a role in credit scores. The most recently available data from Experian shows that while women had an average FICO® Score of 704 in 2019, men had a slightly higher score of 705.
Data collected by the Federal Reserve in 2018 also shows both younger and middle-aged single men had slightly higher VantageScores than single women within the same age groups. The research focused on singles because single men and women are responsible for making their own financial decisions while married couples are presumed to make joint decisions on financial issues.
Credit scores also vary dramatically by state. The average FICO® Score in the lowest-scoring state of Mississippi is 667 -- 66 points below Minnesota's highest-scoring average of 733. Residents of just 17 states have average FICO® Scores below 700.
Research from the Urban Institute found a strong correlation between high credit scores and homeownership. There are a number of factors contributing to this, including the fact that homeowners are often older and, as the data above shows, age correlates to higher scores.
Of course, credit scores of above 620 are typically required to qualify for conventional mortgages, although it is possible to obtain loans backed by the Federal Housing Administration with scores as low as 500.
Since consumers with very low credit scores are effectively barred from buying homes, it naturally follows that homeowners would tend to have better credit on average.
Research from The Federal Reserve found only a moderate correlation between income and consumer credit scores according to data collected between 2007 and 2017, which is the most recently-available data.
After accounting for factors such as age and college education, the impact of income on credit scoring was found to be even more minimal than initial data would suggest.
The charts below show the distribution of credit scores among groups the Federal Reserve classified as high, mid, and low-income consumers.
The Federal Reserve's data uses VantageScore 2.0, the older scoring model that used a scale between 501 and 990. While those in the lower income group were slightly more likely than their wealthier counterparts to have VantageScores below 700, the majority of Americans across each income level had scores between 800 and 990.
One reason income may not impact credit scores as much as expected is because a substantial number of lower income individuals do not have credit scores at all due to insufficient credit profiles.
Individuals with more comprehensive credit histories likely have different financial habits than those of a similar income level who do not use traditional sources of credit.
While average credit scores tell you where you stand if you actually have a score, there are millions of Americans without sufficient credit histories to even receive a score. In fact, according to the Consumer Financial Protection Bureau:
Some Americans are far more likely than others to lack a credit score:
The millions of Americans with no scores at all are often overlooked when comparing average credit scores. And unfortunately, they are often unable to obtain financing from conventional sources and are left at the mercy of predatory lenders including payday and car title loan providers.
The data on average credit scores across America is clear: Credit scores have been improving across the board and the majority of Americans with scores have good credit at the very least.
While this is positive news, there are still millions of Americans who have insufficient credit histories and who lack credit scores completely.
These credit invisibles make it more difficult to determine the true impact of income on credit scores and likely mean that almost 2 in 10 Americans face unprecedented struggles accessing the financial products that others take for granted.
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