How Is Your Credit Rating Growing?
Despite the pandemic, Americans are paying off their debts and the rate of delinquent loans is also falling – two factors that contributed to the largest jump in average credit ratings since 2016. According to the latest data, the average FICO score is 711 , an increase of eight points over 2019, pushing many people towards a “very good” credit rating range. This is how you might stack up.
Uneven recovery
While many people have certainly suffered financially from the pandemic , some Americans who have maintained a stable income have been able to pay off their debt, aided by incentive checks and a long pause in loan repayments.
According to the Experian State of Credit 2020 report , many indicators look good: as with the FICO rating, the average VantageScore has also increased and now stands at 688; average credit card debt fell to $ 5,897; The delinquency rate (3.8%) has almost halved since 2019, and perhaps most importantly, loan utilization has dropped from an average of 30% to 26%. Credit usage is 30% of your total credit rating, which tends to improve if your debt usage is less than 30% of your total credit limit.
However, Americans still have more consumer debt than ever before, with $ 14.56 trillion in debt in the first quarter of 2021 . Most of this is due to mortgage debt, as low interest rates have led to a sharp increase in home purchases. Despite the rise in debt, people seem to keep paying and paying with their credit cards – at least for now.
Higher credit rating gives you better loan terms
Credit ratings are used by lenders to decide whether to give you a loan and to determine the interest rate on that loan. The higher your bill, the less interest you will pay. Typically, your score will depend on what range of scores you fall into, from exceptional to very poor. FICO credit ratings are distributed as follows:
- 800 to 850: Exceptional
- 740 to 799: very good
- 670 to 739: good
- 580 to 669: Satisfactory
- 300 to 579: very bad
If your rating was “good” and has improved over the past year, you may be closer to “very good” than you think (if you need to know the current rating, most credit card issuers will provide it for free). If so, you can take it a little higher by following the tips in this Lifehacker post , especially if you think you will need to apply for a loan or funding later this year.
And since your credit score is based on your credit report (a detailed description of your financial performance), you’ll want to check it often. You can request free credit reports from each of the three major credit bureaus at Annualcreditreport.com (usually you only get one free report each year, but the special provision related to the pandemic allows you to get them for free every week until the end of April 2022 G.).
This story was originally published in 2020 and updated on April 21, 2021 with updated context and new information.