What is the average credit score and how is it measured? Expert tips on how to raise yours
Credit scores don’t matter unless you’re trying to get a loan, rent an apartment, secure insurance, buy a home, avoid paying a deposit to utility companies, or even land some jobs.
OK. Unless you’re living off the grid, they really do matter. The average credit score in the United States is 717, according to FICO, the data analytics company whose scoring model is used in most lending decisions. That’s considered a good score. But millions of Americans still struggle to raise theirs, and low credit scores can make achieving common life goals much more difficult.
Annamaria Lusardi, who heads Stanford's Initiative for Financial Decision-Making, said having a good credit score will save you money because it allows you to secure lower insurance premiums and lower interest rates on loans.
“Just one percentage point difference on a mortgage, even on our auto loans, it’s enormous savings,” Lusardi said. “If we don’t have a good score, we’re actually not going to have any credit. We are shut down from borrowing. That’s why I say the financial system is not forgiving.”
Here’s what to know about credit scores and how to raise yours:
What is a credit score?
A credit score is a three-digit number that indicates how likely you are to pay back money when you borrow it, based on your credit history and data from major credit bureaus.
“I always describe the credit score to my students as their financial GPA,” Lusardi said. “We need to have the best grade available to signal to everybody who wants to work with us that we are a good borrower. That we are a good person with good credit.”
FICO scores, used in 90% of lending decisions, are calculated using five criteria, but the weight of each category can sometimes vary by person.
FICO notes, for example, that scores for people with short credit histories could be calculated differently than for those who have been using credit longer.
How is a credit score measured?
The first and most important thing that affects your score is payment history. Whether and how you paid back past credit generally accounts for 35% of your FICO score.
How much you owe is the second most important thing, generally making up 30% of your score. While the amount matters, your credit utilization is also important. If a person has used all the credit available to them, it can indicate that they are overextended and more likely to miss payments, FICO notes.
The third aspect, the length of your credit history, generally accounts for 15% of your score. The age of your oldest account, newest account, and the average age of all your accounts will play into your score.
The fourth and fifth categories generally each make up 10% of your score. They are the amount of new credit you have and your credit mix. Opening multiple new credit lines in a short amount of time can drop your score, particularly if you don’t have a long credit history.
Your credit mix reflects the different kinds of credit you manage. It can include credit cards, mortgages, car payments, and more. If you have several types of credit and routinely make payments on them, it can boost your score.
What's the highest credit score you can get?
The highest FICO score possible to achieve is 850. That’s a perfect score and it’s not always necessary to get the best terms and rates when borrowing.
FICO scores are divided into five ranges: poor, fair, good, very good and exceptional. According to data from Experian, 71% of Americans have a good score or better.
Some 13% have a score between 300 and 579, which is in the “poor” range. Another 16% have a score between 580 and 669, falling in the “fair” range. The next 21% are in the “good” range, meaning they have a score between 670 and 739.
At 28%, the highest percentage of people fall within the “very good” range and have a score between 740 and 799. In the “exceptional” range are 22% of Americans, who have a score between 800 and 850.
What's the average credit score by generation?
According to other data from Experian, credit scores tend to increase over time. It found the average FICO scores in 2024 by generation were:
◾Generation Z: 681
◾Millennials: 691
◾Generation X: 709
◾Baby boomers: 746
◾Silent generation: 760
How do you raise your credit score?
A common misconception about credit scores is that checking yours will make it drop. That’s not true. However, lenders checking your credit score, like when you go to buy a car or open a credit card, can make it decrease for a short time, Lusardi said.
You can view your own often through your bank or credit union, and online at myfico.com.
If you’re trying to raise your score, the best thing you can do is pay off debt, Lusardi said. She also recommends using only about 70% of the credit available to you to avoid indicating that you are overspending.
In terms of improving your credit mix, Lusardi said it’s important to manage the different types of credit you have well. If you don’t have student loans, a mortgage, or another loan, but have one credit card, she doesn’t recommend opening a new line of credit just to raise your FICO score.
“In this case, I actually wouldn't worry too much about it,” Lusardi said. “I don't think that it is worth opening a new line of credit, both because it is only 10% and because if you don't have other sources of debt, there is really no reason.”
To maximize the length of your credit history, don’t close old credit card accounts, Lusardi said. She also warns against opening multiple new lines of credit at once because that could signal that you are in financial trouble.
Reach Rachel Barber at rbarber@usatoday.com and follow her on X @rachelbarber_