While most Americans have a credit score that is generally considered “good,” it may be helpful for those looking to raise their rating to know exactly which factors agencies use to calculate it.
According to Experian, the average FICO score in the second quarter of 2019 was 703, though scores tended to vary by age. Americans between the ages of 20 and 29 had the lowest average score, 662, compared to people aged 60 and over, whose scores averaged 749. The state with the highest average credit score as of the second quarter – 733 – was Minnesota.
The average FICO credit score reached 704 in 2018, which was an all-time high.
But do you know what aspects of your financial history go into calculating your credit score?
According to FICO, there are a number of factors that are taken into account when your credit score is calculated, and the importance of each factor varies.
Among each person, the weight placed on each category will be different based on things like the length of an individual’s credit history.
Here’s a look at what the primary considerations are, for the average person, according to FICO:
Payment history (35 percent)
Comprising the largest chunk of your credit score is your payment history, which measures whether you have paid what you owe on time. This helps a potential lender evaluate how likely you are to repay and thus how much risk lending to you would be.
Amounts owed (30 percent)
The second largest factor used to determine the credit score of a typical American is the amount of available credit you use. If you are using a lot of your credit line, banks are likely to assume you are at a higher risk of default.
Length of credit history (15 percent)
People with longer credit histories tend to have higher credit scores.
The score factors in the average age of all your accounts, how long specific credit accounts have been established and how long it has been since accounts were used.
Credit mix (10 percent)
A FICO score takes into account your mix of credit cards, retail accounts, installment loans, mortgage loans, etc. It is not necessary to have one of each.
New credit (10 percent)
FICO notes that opening a number of new credit accounts over a short span of time represents a greater risk for a lender.