Can I Buy a Home With Bad Credit? The Answer May Surprise You! If you've ever…
The average FICO credit score in the United States is a 687. The medium credit score in the US is a 723. Which one is a better determinant of the credit worthiness of Americans? In assessing credit scores, the medium is a better indicator when assessing the credit scores of Americans on the aggregate. That is because in terms of talking about an average credit score, that is just a number and does not tell you where you fall within the credit score range—as in, what is your percentile. Whereas, if you measure credit score by the medium, you know what your score is and where it is in relation to the rest of the population. In other words, the medium score tells you precisely and accurately what your score is and where you rank.
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However, as we break down credit scores by different groupings, the average becomes more of a factor and is indicative of inherent inequalities.
For instance, if you break down the average credit scores in America by age, you will get the following statistics (chart provided by Credit Karma).
As you can see, your credit score increases as you get older. This should not be at all surprising to you as length of credit history is included in the credit score calculations.
What about credit scores among different demographics?
It shouldn’t be surprising that people living in minority neighborhoods had an average credit score in the 18th percentile. The 18th percentile is barely above a FICO score of 550 and is well under the national average of 687. Those that did not live in predominantly minority neighborhoods had an average credit score in the 57th percentile. The 57th percentile would put one’s score slightly below a FICO score of 700. This statistic was reported by the Missouri Department of Insurance.
The Texas Department of Insurance also did a study in which they found that whites and Asians on average had better credit scores than other races.
What Does The Average And Medium Score Mean?
Stated above, the average credit score is a 687. With a FICO score of 687, you will not be able to get the best rates on loans, credit cards, and mortgages. However, your rates will often be favorable. Credit card companies may offer you a card with a credit limit of a few thousand dollars but they won’t offer you anything in the xx,xxx range. Auto lenders may not give you 0% financing but they may still be able to give you affordable rates, especially if you buy a new car. Mortgage lenders may not be able to give you your best rates but they will still lend to you and you may need to pay more in PMI.
The medium credit score is a 723. With a score of 723, you can get close to the best rates anywhere, if not the best rates. Credit card companies may give you a credit limit near the xx,xxx range. Auto lenders may give you 0% financing, even on used cars. Mortgages will give you their second best rate, if not their best rate. The difference between the second best rate and the best rate is very minimal.
What Is Considered A Good Credit Score
Arbitrarily, a good credit score is anything over 700-720. A really good credit score is between 721-759. And a great credit score is anything over that is at least 760. Credit scores from 760-850 don’t really change the rates you get on your loans so anything above a 760 is just for bragging rights. Keep in mind that different banks will charge slightly different rates based on the same credit score so be sure to shop around when you are getting a loan.
What Credit Score Is Needed For A Credit Card
Even after the credit crunch, getting a credit card is still relatively easy—even if you have a bad credit score. If you have a credit card below 620 or so, you will probably only be able to get credit cards that require an annual fee with no additional benefits. These cards will usually have a low credit limit also. The annual fees and the low credit limit is to hedge the risk of lending to relatively high-risk borrowers. If you want a credit card with travel rewards and points, you should count on having a credit score over 700, and low debt. To be safe, your credit score should be over 740—if you have a credit score that high, you will be able to get any card you want. To find out your free credit score, go to Credit Sesame and sign up for their FREE service.