What is the average credit score? It’s a fair question, but it isn’t necessarily the question you should be asking. Many people want to know what the average credit score is because they want to know where they stand in relationship to other borrowers. There is a way in which each potential borrower is being compared to others, but it’s not about being above or below average. Here are the answers to the important questions about: what is the average credit score?
To get the simple answer out of the way, the current average credit score is around 680. This can change of course, based on people’s borrowing practices moving forward, but if your score is around 680, it’s about average. What is really important, however, is what your credit score tells lenders about the level of risk you represent. Lenders put people in different score ranges by risk. Meaning, there is a higher percentage of people in some score ranges who default than other score ranges. People with an “average” score will still default a given percentage of the time. That percentage determines whether you are a good risk for a lender, and how much they need to charge you in interest to make it worthwhile to lend to you.
If you do have a score around 680, you are a pretty good risk for lenders. You won’t necessarily be in the preferred categories reserved for those who have a 740 score or above; those people will get the most flexibility when it comes to loans and interest rates. However, you can still expect to get the loan you need at a fairly competitive rate. If you drop far below that level, however, you will have difficulty getting a loan unless you are willing to take on some very high interest rates. If your credit rating is in the 500s or worse, you will likely face problems getting approved for a loan.
Again, you shouldn’t be focused on averages. That being said, if you get an above average credit score, that generally means boosting your score into the 700s or above, and that can be great news for you financially. Therefore, you should definitely endeavor to make this happen. Start by getting informed. Look at your credit report and credit score. You can get free credit scores from CreditScore.com. Check your score and think about where you want it to be. Look over the report and determine how you could better manage your credit. It might mean paying off balances or cancelling one of those credit cards. It might just mean being better at making timely loan payments. Whatever it is, a higher score will mean more borrowing power, and with some knowledge and effort, you can make it happen.