credit score in the U.S.

States With the Highest and Lowest Credit Scores in the U.S

Highest and Lowest Credit Scores: An important measure of financial health is a credit score, which usually ranges from a low of 300 to a high of 850.

It can mean your trust in financial institutions, and it serves as one of the key metrics in assessing American consumers ‘ economic health, reflecting the ease or difficulty with which people can make payments on their mortgage, car loans, and other obligations.

Highest and Lowest Credit Scores

A new report from Experian reveals that, in the U.S., the average credit score in 2017 was 675, up two points from 2016. That’s the highest average credit score since 2012. Credit scores are starting to bounce back from the financial crisis of 2008 and are now just four points away from the 2007 average of 679.

Here are the states with the highest and lowest credit scores in the U.S.

States with the highest and lowest Credit scores

When it came to credit scores, though, Experian’s report found that some cities fared significantly better than others. The 10 cities with the lowest average Vantage credit scores of 2017, according to Experian, are:

  1. Greenwood, Mississippi: 624
  2. Albany, Georgia: 626
  3. Harlingen, Texas: 631
  4. Laredo, Texas: 635
  5. Riverside, California: 636
  6. Corpus Christi, Texas: 638
  7. Odessa, Texas: 640
  8. Monroe, Louisiana: 640
  9. Montgomery, Alabama: 640
  10. Shreveport, Louisiana: 640

On the flip side, the cities with the highest average Vantage credit scores in 2017 are:

  1. Minneapolis, Minnesota: 709
  2. Rochester, Minnesota: 708
  3. Mankato, Minnesota: 708
  4. Wausau, Wisconsin: 706
  5. Green Bay, Wisconsin: 705
  6. Duluth, Minnesota: 704
  7. Sioux Falls, South Dakota: 704
  8. San Francisco, California: 703
  9. La Crosse, Wisconsin: 703
  10. Madison, Wisconsin: 703

Credit card debt is climbing

However, while credit scores are climbing, so is credit card debt.

Experian’s report found, on average, Americans’ credit card debt crept up 2.7 percent in 2017, from $6,188 to $6,354. Millennials in particular took on much more credit card debt, climbing 10.8 percent from $3,894 to $4,315. Meanwhile, Gen Xers saw an increase of 5.1 percent in credit card debt from $7,372 to $7,750.

The Federal Reserve once announced that outstanding credit card debt hit a new high in November, increasing by $11.2 billion to $1.023 trillion.

Experian’s wide-ranging report also highlights that non-mortgage debt (which includes auto and student loan debt) is really rising, especially for younger people, and is up 15 percent for Gen Z, 9 percent for millennials and 5 percent for Gen Xers.

Experian’s analysis is based on a statistically relevant sampling of Experian’s consumer credit database as of Q2 2017.

What is the Best Credit Score?

You’ve probably heard someone boast about how they have “perfect” credit. That would mean they have a FICO score of 850. In order to achieve that they would need to have at least five credit card accounts, one mortgage or auto loan, 30 years of credit history, 20 years of positive account history, no late payments for the last seven years, and a debt level that doesn’t exceed 35 percent of their total available credit. So, the next time some young 30-year old tells you he has perfect credit, you’ll know he’s full of it.

While having perfect credit is a laudable goal, most people would be ecstatic to be able to cross the 800 score threshold. It doesn’t happen overnight, but it’s also not that difficult if you know what to do. It also helps to understand how credit scores are generated and utilized.

What Your Credit Score Really Means

With the big fixation on credit scores, consumers may be misleading themselves as to their true credit worthiness. You might be ecstatic to learn that your credit score increased from 660 to 700; but to the lender, your credit is still just “above average” and is in a “medium” risk range. It’s important to know your credit score, but you should be more concerned with the different credit score ranges for each risk level. The possible credit scores that FICO calculates using its proprietary algorithms are arranged by risk levels, which are also based on an algorithmic formula.

Credit Score Range Risk Level Probable Outcome
579 and below Very poor Little possibility of obtaining credit
580 to 619 Poor May be approved with high interest rate
620 to 659 Average Can be approved with high interest rate
660 to 699 Good Will be approved with average interest rate
700 to 759 Great Will be approved with low interest rate
760 and above Excellent Will be offered the best interest rates

This is FICO’s current credit score range, and it always remains somewhat fixed. But, the range is also subject to interpretation by individual lenders. For instance, prior to the 2008 credit crisis, a credit score of 730 would have garnered the best available mortgage rates.

But following the crisis, lenders wanted to see credit scores above 760 before offering the lowest rates. As the economy improves and lenders’ overall credit risk decreases, they tend to loosen their requirements.

Not All Credit Scores are Equal

FICO was the original credit scorer and is still considered to be the standard bearer for consumer credit scoring. Initially, FICO sold its credit scores to the credit bureaus – TransUnion, Expedia and Equifax – who in turn sold them to consumers and lenders. Eventually, the credit bureaus used their own massive databases to come up with their own credit scoring models. Initially, they banded together to come up with the VantageScore®. Later, Experian came up with its own model called PLUS.

Today there are three credit scoring models in use – FICO, VantageScore 3.0®and Plus. Although their algorithms for scoring are closely held secrets, they generally follow the FICO model. The scoring differs as do the scoring ranges for some models.

The FICO credit score ranges from 300 to 850, and the VantageScore 3.0® credit score covers the same range of 300 to 850. However, the Experian PLUS credit score ranges from 330 to 830.

Which Credit Score is the Most Important?

FICO remains the primary scorer for more than 90 percent of lenders. However, an increasing number of lenders now use both FICO and VantageScore®.

Lenders are also taking the data supplied by FICO and Vantage and interpolating it with their own formulas; so it is difficult to know which scoring model is being applied. The Experian Plus score is not used by lenders because it was developed as an educational tool for consumers.

The Path to an 800 Credit Score

Obtaining a top credit score is not that difficult once you understand what goes into scoring your credit. However, it does take time and there is very little room for error. Here’s exactly what you need to push your score to the top.

Never Miss a Payment

Your payment history comprises a whopping one third of your credit score. Just one missed payment can drop your score by as much as 110 points. The only thing worse than a missed payment, which remains on your credit report for seven years, is a bankruptcy.

Maintain a Low Debt-to-Credit Limit Ratio

Credit utilization is the next biggest factor in scoring your credit. To keep you score moving higher, it’s recommended that your debt ratio be no more than 35 percent; 25 percent is better. The average debt ratio for those with the highest credit scores is 7 percent.

Diversify Your Credit

Your ability to handle a variety of credit is another big scoring factor. You will need a good mix of credit, such as credit cards, installment loans, an auto loan or a mortgage.

If you’re currently limited in your mix, you might consider going to a bank or credit union and taking out a small, secured personal loan using your savings as collateral, or purchase your next appliance on an installment loan.

Keep Your Accounts Open and Active

People with a lot of credit cards are sometimes tempted to close accounts they don’t use. While that may seem the prudent course, it can also hurt your credit score because it can lower the amount of available credit while increasing your credit utilization ratio.

Credit activity is also important because that is what drives your payment history score. It’s recommended you use your credit cards each month but then pay the balance in full.

Monitor Your Credit

The Path to an 800 Credit Score

You should check your three free credit reports each year to ensure there are no errors. Credit reporting errors occur more frequently than we’d like to think, and any incorrect item – a wrong Social Security number, a misreported payment or credit limit, or a rogue inquiry – could hurt your credit score. If you are real serious about reaching the 800 mark, then you should consider subscribing to a credit monitoring service that costs about $10 a month.

Give Yourself Some Time

Even if you apply these essential credit building rules, you may not be able to break 800 for a few years. It usually requires at least 10 years of a “perfect” credit history to achieve an 800 score. While it may not actually take that long, you need to give yourself the proper time horizon and know that your score will grow each day.

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