The Average American's Credit Score -- and How to Maximize Yours

By Matthew Frankel Markets Fool.com

I won't keep you in suspense: The average American's FICO credit score is an even 700 as of the latest FICO Score High Achieversstudy. No great surprise there-- it's a respectable, but not excellent, score. What's surprising is that the credit behaviors of people with the highest scores are almost identical to those of average credit users. However, the highest achievers make better decisions in a few key areas.

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Image Source: Getty Images.

The average American's credit profile

The average American's 2016 FICO score of 700 is up slightly from an average of 695 in 2015. It's worth mentioning that an updated FICO scoring method, FICO Score 9, is now being used in the analysis, so it's possible the small increase could be due to this change.

Here's a little more color on the average American's credit profile. The average person opened their oldest revolving credit account 194 months (about 16 years) ago and opened their most recent credit account 14 months ago. Only 57% of Americans have no delinquencies affecting their credit score, and the average person's latest delinquency was 17 months ago.

Furthermore, the average American carries a total non-mortgage balance of $8,611 and uses 15% of their available credit on revolving credit lines like credit cards. They have six open revolving credit accounts on average and have outstanding balances on all of them.

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What separates the average American from a "FICO high achiever"?

It may surprise you to learn that nearly 40% of the U.S. population fits FICO's definition of a "high achiever," which means they have a FICO score of 750 or higher. Nearly one-fourth of the population has a score above 800, which puts consumers firmly into the top-tier of credit no matter what they're applying to buy (home, car, etc.).

Many credit behaviors don't vary much between high achievers and the average consumer. For example, the amount of time since the last account was opened isn't much different, at 14 months for the average consumer and 15 months for those with FICO scores of 800 or higher. And it often comes as a surprise that the average high achiever has nine open revolving credit lines -- three more than the average American. In other words, FICO high achievers do actively use their credit.

There are only a few key ways that the average American and high achievers differ. Delinquencies are a big one. I already mentioned that 43% of Americans have delinquencies, with an average of 17 months since the latest one. Well, just 5% of Americans with scores of 800 or more have any delinquencies, and the few who do had their least delinquency almost four years ago. The lesson: If you want to be in the upper tiers of credit scores, pay all your bills on time, without fail, every month.

Another big difference is the percentage of available credit high achievers use. The average high achiever carries a revolving credit account balance of $1,446, which represents just 4% of their available credit, compared to 15% for the average American. Since 30% of your FICO score comes from the amounts you owe on your credit lines, this can make a big impact.

Here's a breakdown of these and some of the other differences between average Americans and FICO high achievers:

Category

Average American

FICO Score 750-799

FICO Score 800-850

% of consumers with no delinquencies

57%

72%

95%

% of consumers with collection items greater than $99

23%

3%

0.5%

Total revolving credit utilization

15%

10%

4%

Highest revolving credit utilization

37%

25%

10%

% of accounts with outstanding balances

100%

80%

70%

Data Source: FICO.

What a great credit score means to you

The bottom line is that there's no magic formula for a great credit score -- in fact, as you can see in the chart above, much of the factors are common sense. Pay all your bills on time, don't use too much of your available credit, and under no circumstances let an account get sent to collections. If you're looking to get a few extra points on your score, here are some other tips that you may find helpful.

It's a well-known fact that generally, a higher credit score translates to better interest rates and credit offers, but you may be surprised at the potential difference. To illustrate this, let's say you're buying a home and need to obtain a $250,000, 30-year fixed-rate mortgage. As of this writing, here's what you can expect, based on your FICO score.

FICO Score

APR

Total Interest

Difference vs. Top Tier

760-850

3.909%

$174,966

N/A

700-759

4.131%

$186,499

+$11,533

680-699

4.308%

$195,807

+$20,841

660-679

4.522%

$207,194

+$32,228

640-659

4.952%

$230,503

+$55,537

620-639

5.498%

$260,897

+$85,931

Data source: myFICO.com.

As you can see, having a top-tier credit score can save you tens of thousands of dollars in interest, so make good credit behavior a priority for you.

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