Congratulations, America! You've done a great job with your credit. Your average FICO credit score reached 699 in April 2016, at the upper end of what is normally considered the fair credit range (650-699). By the time October 2016's information is compiled and released, you may well have broken into the "good" credit range (700-749).
Average FICO scores have been on a generally upward trend since October 2009, when they hit a relative low of 686. Not only have the average scores been rising, but the scores on either end of the scale also show positive trends. The percentage of Americans in the 300-499 FICO score credit range (the poorest credit range possible) fell consistently from 7.3% in October 2009 to 4.6% in April 2016. In the same period, the percentage of Americans in the highest FICO scoring range of 800-850 rose from 18.2% to 20.4%.
Over 55% of the April 2016 FICO scores fell in the good credit range and above (700-850) — meaning that the median score is already located somewhere in the good credit range.
How did America achieve this rating? It's possible that there is a negative undercurrent to the numbers through lower-scoring individuals simply falling out of the scoring system due to lack of credit usage (or availability), but a more positive explanation lies in the timing of the data. Negative payment information has to be purged from credit files no later than seven years beyond the occurrence of that information — and seven years ago, America was in the depths of the Great Recession.
Another component is a decrease in serious credit delinquencies (defined as bills at least 90 days past due). Payment history makes up 35% of your FICO credit score — the largest single component — so decreased delinquencies have a large positive impact. Since the Great Recession was driven in part by a housing market crash, it's not surprising that the major decrease in delinquencies is in real estate loans (a 2.6% drop within three years).
There is another possible explanation for rising average scores — Americans overall may be using their credit in a more responsible fashion. If your FICO score is falling short of America's upward trend, take a look at your habits to see how well they match up with the habits of FICO high achievers (score of 800, compared to the 850 maximum score).
- Do you pay your bills on time? The vast majority of high FICO score achievers (96%) have no late payments in their credit reports at all.
- Do you keep your credit utilization (the amount of credit that you use compared to your total available credit) low? High FICO score achievers use a mere 7% of their total credit limit on average. It is a good rule of thumb to stay below 20% credit utilization.
- Do you keep your balance low? The average high achiever has a balance of less than $3,500 — and paying your bills in full will keep your balance low and help you to avoid high interest rates.
- Do you have a long-running history of stable credit accounts? The average age of the high FICO score achiever's credit accounts is around eleven years, with the oldest account opened 25 years ago.
Try your best to follow these habits, and you can be part of helping America reach even greater average FICO scores. Onward to excellent credit, America!
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