Regardless of the financial breakthrough you’re reaching, when it comes to financial progress and credit, it is very essential to understand the factors that may impact your credit scores.
Generally speaking, the higher your credit score is, the better off you are when searching for a loan. Your credit score plays a huge role in daily life as it can determine the interest rate you’ll pay for your credit cards, car loans, and mortgages or when planning to get a loan.
According to a report from FICO, a developer of one of the scores widely used by lenders, the national average credit score of 716 remained unchanged from a year ago. The report found that this is the first time that scores did not improve year over year since the Great Recession. Missed payments, elevated consumer debt levels, and an increase in the number of consumers opening new credit cards or new lines of credit were the identified reasons that the score did not improve.
These risky behaviors have contributed to the leveling off of the average FICO scores, the report says.
The FICO scores range from 300 to 850. A good score is above 670 while a very good score is over 740. If the score reaches 800 or above, it is already considered exceptional.
Which state has the highest, and lowest, credit scores?
Minnesota residents have an average credit score of 724, the highest score nationwide. New Hampshire, Vermont, and Massachusetts are the second-highest states with a high average credit score. According to FICO, Residents in these states are less likely to miss payments, open new credit, and have a lower ratio of debt to total credit.
Mississippi residents had the lowest ranking with an average credit score of 662 along with Louisiana, Alabama, and Arkansas.
Why your credit score is important?
The higher your credit score, the higher chance you have when it comes to seeking a loan. You can qualify for a lower rate and are more likely to be approved. Most lenders will consider your creditworthiness “good” if you have an average score of 716.