Wondering how your credit score measures up against the national average? You're not alone. Many Americans do not even know their own score, much less how it compares to other borrowers. But your credit score falls into one of the following broad categories. A score of 750-840 is generally considered "Excellent" credit. A score of 660-749 is considered "Good" credit. 620-659 is "average" credit. Anything below that is considered "Poor" credit, and probably indicates that you have a history of late payments or other black marks on your credit report, such as an outstanding loan or default.
With most people's scores falling somewhere between 500 and 850, you would assume that the average score was somewhere in the middle. However, you would be wrong about that. A surprising number of people have a score above 700, with the largest percentage 27%, according to some estimates between 750-799. So, according to most sources, Americans have pretty good credit at least enough to qualify them for the best interest rates on mortgages and credit cards.
In a recent study from Experian (March 2008), the credit bureau officially calculated the national average credit score at 692. That's not bad, by most standards. But, like everything else, that score is relative to what the market will bear.
For example, at the same time that national average was reported, the subprime mortgage crisis hit. At that time, lenders raised the minimum credit score needed to qualify for a good interest rate on a mortgage loan from 680 to 720. So, with an average score of 692, the average American suddenly found themselves to be considered a subprime borrower!
Banks, credit cards and other lenders use credit scores to evaluate the potential risk of lending money to you. Your credit score determines whether or not you qualify for a loan, and at what rate of interest you can borrow. Having a good credit score means you get better rates, higher credit limits, and other benefits. It's important to know your credit rating if you plan to apply for a home loan, car loan, or any other form of credit.
