How to Improve Your Credit Score in the United States: A Guide for 2023

Credit score is one of the most important factors that lenders use to evaluate your creditworthiness and offer you loans, mortgages, credit cards, and other financial products. Having a good credit score can help you save money on interest rates, qualify for better terms, and access more opportunities. But what is a good credit score, and how can you improve yours?

What is a credit score?

A credit score is a number that summarizes your credit history and reflects how well you manage your debt. It ranges from 300 to 850, with higher scores indicating lower risk. There are different types of credit scores, but two of the most widely used are FICO® Score and VantageScore®.

FICO® Score is developed by Fair Isaac Corporation and used by 90% of top lenders in the US. It considers five factors: payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%), and credit mix (10%).

VantageScore® is developed by Equifax®, Experian®, and TransUnion®, the three major credit bureaus in the US. It considers six factors: payment history (40%), age and type of credit (21%), percentage of credit limit used (20%), total balances/debt (11%), recent credit behavior and inquiries (5%), and available credit (3%).

Both FICO® Score and VantageScore® use similar ranges to classify scores:

800-850: Exceptional
740-799: Very good
670-739: Good
580-669: Fair
300-579: Poor

What is the average credit score in the US?

According to Experian®, one of the major credit reporting agencies, the average FICO® Score in the US was 714 as of September 2021. This falls into the "good" category, which means that most Americans have a decent chance of getting approved for loans or other forms of credit.

However, the average credit score varies by state, age group, income level, and other factors. For example:

The states with the highest average FICO® Scores were Minnesota (739), South Dakota (734), Vermont (733), New Hampshire (732), and Massachusetts (731).
The states with the lowest average FICO® Scores were Mississippi (675), Louisiana (677), Nevada (686), Texas (688), and Oklahoma (689).
The age group with the highest average FICO® Score was baby boomers (ages 56 to 74), with a score of 736.
The age group with the lowest average FICO® Score was millennials (ages 24 to 39), with a score of 680.
The income level with the highest average FICO® Score was $100K or more per year, with a score of 765.
The income level with the lowest average FICO® Score was less than $25K per year, with a score of 662.

Sources:

[2] Credit Reports and Scores | USAGov

[3] Average Credit Score in America: 2021 Report - ValuePenguin

[4] What Is Average Credit Score for Each State? - Business Insider

[6] Average Credit Score in America: Report | The Motley Fool

How can you improve your credit score?

Improving your credit score takes time and effort, but it can pay off in many ways. Here are some tips to help you boost your score:

Check your credit reports regularly. You can get one free copy of your report from each of the three major bureaus every year through AnnualCreditReport.com . You can also get free weekly reports until December 2023 due to COVID-19 pandemic relief measures . Review your reports for any errors or inaccuracies that could lower your score , such as incorrect personal information , accounts that don't belong to you , or payments that were reported late when they weren't . If you find any errors , dispute them with each bureau as soon as possible.
Pay your bills on time. Your payment history is one of the most important factors that affect your score , so make sure you pay at least the minimum amount due on all your accounts every month . If you have trouble remembering or managing your payments , set up automatic payments or reminders through your bank or creditor . You can also contact your creditors if you're facing financial hardship or need more flexible payment options .
Keep your balances low. Your amounts owed or utilization ratio is another key factor that affects your score . This measures how much of your available credit limit you're using across your different accounts.

If you are looking for ways to improve your credit score in United States, you are not alone. Millions of Americans struggle with low or bad credit scores that can affect their ability to access credit cards, loans, mortgages and other financial products. A good credit score can also help you save money on interest rates and fees, as well as qualify for better rewards and perks.

Your credit score matters because it affects how lenders, landlords, employers and others view your financial trustworthiness. A good credit score can help you qualify for better terms and conditions when borrowing money or renting a property. It can also help you avoid paying higher deposits, fees or insurance premiums.

How to Improve Your Credit Score Fast

There is no quick fix for improving your credit score overnight. However, there are some steps that you can take to boost your score over time. Here are some of them:

Pay down your revolving credit balances: One of the most effective ways to lower your credit utilization rate and improve your score is to pay off your outstanding balances on your credit cards or lines of credit. Ideally, you should aim to keep your utilization below 30%, but lower is even better. To do this, you can either pay more than the minimum amount each month or make multiple payments throughout the month.
Increase your credit limit: Another way to lower your utilization rate is to request a higher limit on your existing accounts. This will increase the amount of available credit that you have relative to your balance. However, be careful not to use this as an excuse to spend more than you can afford.
Check your credit report for errors: Sometimes, mistakes or inaccuracies on your credit report can drag down your score without you knowing it. For example, there could be a late payment that was reported incorrectly or an account that does not belong to you. You should review your report at least once a year and dispute any errors with the three major bureaus: Equifax®, Experian® and TransUnion®.
Ask to have negative entries removed: If you have paid off a collection account or settled a charge-off account, it may still appear on your report for up to seven years. However, some creditors may be willing to remove these negative entries if you ask them nicely. This can improve your score by reducing the number of accounts with balances on your report.
Use a secured card: If you have no or limited credit history, one way to build it is by using a secured card. A secured card requires a cash deposit that serves as collateral and acts as the limit for the card. You can use it like any other card but make sure to pay it off in full every month. This will show lenders that you are responsible with managing debt.
Get credits for rent and utility payments: Another way to add positive information to your report is by getting credits for paying rent and utility bills on time. These payments are usually not reported by default but some services like Experian Boost™, Rental Kharma® or LevelCredit® can help you do so for free or at low cost.

A good credit score can have many benefits for your financial life. It can help you qualify for lower interest rates on loans and credit cards, save money on insurance premiums, rent an apartment, or even get a job. A good credit score also reflects your ability to manage your finances responsibly and pay your bills on time. Therefore, it is important to maintain or improve your credit score as much as possible.

So, there are several ways to increase your credit score over time. Some of the most effective strategies are:

Paying your bills on time every month.
Keeping your credit utilization ratio low.
Checking your credit reports regularly and disputing any errors or inaccuracies.
Applying for new credit only when you need it and avoiding opening too many accounts in a short period of time.
Diversifying your credit mix by having different types of accounts, such as revolving (credit cards) and installment (loans).

By following these tips, you can improve your credit score over time and enjoy the benefits of having a good financial reputation.

In conclusion, your credit score is a vital indicator of your financial health and stability. It can affect your ability to borrow money, get a mortgage, rent an apartment, or even get a job. Therefore, it is important to monitor your credit report regularly and take steps to improve your credit score if needed. By following the tips and advice in this blog post, you can boost your credit score and enjoy the benefits of having a good credit history.