What is an average credit score?
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The Discover it® balance transfer offer is currently not on the market.
Although a fair and average credit score is better than no credit or bad credit, you should be actively working on improving your credit score if you have recently checked your score and learned that it is lower than you expected.
You can qualify for a variety of financial products with average credit, but you likely won’t receive the best interest rates, rewards, and terms since lenders take you out. credit report and weigh your three-digit credit score during the approval process. The higher your credit score, the better your chances of qualifying for the best credit cards, mortgage loans and competitive lending rates.
Below, CNBC Select explains what a fair and average credit score is for FICO and VantageScore, how to improve a fair and average credit score, and how to get a free credit report.
- What is a fair and average credit score?
- How an average credit score can hurt you
- How to improve an average credit score
- How To Check Your Credit Score For Free
Credit score ranges vary based on two main factors: the credit score model used (FICO vs. VantageScore) and the credit bureau (Experian, Equifax, and TransUnion) that pulls the score. Below, you can check what credit score range you are in, using Experian’s estimates.
- Very poor: 300 to 579
- Fair: 580 to 669
- Good: 670 to 739
- Very good: 740 to 799
- Excellent: 800 to 850
- Very poor: 300 to 499
- Poor: 500 to 600
- Fair: 601 to 660
- Good: 661 to 780
- Excellent: 781 to 850
Credit ratings are calculated differently depending on the credit scoring model used. Here are the key factors that FICO and VantageScore consider.
- Payment history (35%): If you paid your old credit accounts on time
- Amounts due (30%): The total amount of credit and loans you are using against your total credit limit, also known as the usage rate
- Length of credit history (15%): The duration of your credit
- New credit (10%): How often do you apply for and open new accounts
- Credit composition (10%): The variety of credit products you have available including credit cards, installment loans, finance company accounts, mortgages, and more.
- Extremely influential: Payment history
- Very influential: Type and term of credit and percentage of credit limit used
- Moderately influential: Total balances / debt
- Less influential: Available credit and recent credit behavior and inquiries
Refusal of credit
If you have bad or average credit (FICO score below 670), you may have lower approval chances for credit cards and loans. This may impact some of the goals you are looking to achieve, such as get out of debt. If you are in debt and are considering debt consolidation options, such as a credit card balance transfer, as the Discover it® balance transfer, you will need good or excellent credit.
Less favorable loan and interest terms
While an average credit score can still make you eligible for credit products, you can be hampered by higher interest rates which can add to a loss of money when you take out a loan. mortgage or automatic loan. And if you open a variable rate credit card, you could receive a APR towards the upper range.
Consider an example where two people, one with average credit and the other with excellent credit, apply for the same card with an APR varying from 15.74% to 23.74%. The average credit cardholder receives an APR of 23.74% while the cardholder with excellent credit receives an APR of 15.74%.
Both cardholders accumulate $ 5,000 in credit card debt and plan to pay it off after 12 months. Here’s roughly how much interest each cardholder would earn over the 12-month period:
- Average credit card holder: $ 666
- Excellent credit card holder: $ 436
Compared to someone with excellent credit, an average consumer with credit would have $ 230 more in interest charges for the exact same decision.
In addition, some best credit cards for fair and average credit have annual fees, such as Capital One® QuicksilverOne® Cash Rewards credit card with an annual fee of $ 39.
Limited credit card choices
Having average credit usually means you’re eligible for relatively simple cards with lower reward rates or no rewards, like the Capital One® Platinum Credit Card, which does not have a rewards program. And if you do qualify for a rewards card, the rates are generally not as competitive as some of the better cards for good or excellent credit.
For example, the Capital One® QuicksilverOne® Cash Rewards credit card requires fair or good credit and offers 1.5% cash back on all purchases with an annual fee of $ 39. In comparison, if you have excellent credit, you may be eligible for the no-charge annual fee. Citi® Double Cash Card and earn 2% Cash Back: 1% on all purchases and an additional 1% after paying your credit card bill.
Please note that even if your credit score is in the fair and average range, there is no guarantee that you will be approved for a credit card requiring fair and average credit. Card issuers look at more factors than your credit score, including income and monthly housing payments.
More than seven in ten Americans (77%) say feeling anxious about their financial situation, according to the Mind over Money survey conducted by Capital One and The Decision Lab. But there are steps you can take to improve your average credit score and reach your financial goals. Follow these tips to help you increase your credit score.
- Make payments on time. The most important factor in your credit score is payment history, so it’s essential to always pay on time. Consider setting up automatic payment or reminders to ensure timely payments.
- Pay in full. While it is essential to do at least your minimum payment each month, you should aim to pay your entire bill each month to reduce your usage rate, which is the percentage of your total credit limit that you use. To calculate your usage rate, divide your total credit card balance by your total credit limit.
- Don’t open too many accounts at once. When you apply for credit, whether it’s a credit card or a loan, a investigation appears on your credit report, regardless of whether you are denied or approved. Inquiries temporarily lower your credit score by about five points, which doesn’t sound like much but can add up if you submit multiple inquiries. Your score will rebound within a few months, but you should still try to limit requests as needed. Fortunately, you can shop with prequalification tools that don’t hurt your credit score and can give you insight into which cards you might have the best chance of qualifying for.
Most card issuers provide free credit score resources that can help you track your progress toward good credit. And there are dozens of free credit score services available that offer your free FICO or VantageScore whether or not you are a cardholder. Here are some free and popular credit score resources.
Capital One® QuicksilverOne® Cash Rewards Credit Card and Capital One® Platinum Credit Card information was independently collected by CNBC and was not reviewed or provided by the card issuer prior to posting.
Editorial note: Any opinions, analysis, criticism or recommendations expressed in this article are the sole responsibility of Select’s editorial staff and have not been reviewed, endorsed or otherwise approved by any third party.