Most Americans Have a 'Good' or Better Credit Score. Do You?

If you're a normal human (as opposed to a personal finance writer, like I am), it's likely that you don't give much thought to credit scores. This is a mistake, however -- credit scores are an important part of Americans' financial picture. Yours has a major influence on how much you'll pay to borrow money, whether you can set up utility services without making a deposit, and more.

Let's take a closer look at Americans' credit scores and why they matter. And read to the end for a few important tried-and-true tips to boost your credit score, if it needs some work.

The data is in

Credit bureau Experian has new information on credit score averages from 2023 -- and the news is good. Overall, the average FICO® Score in the U.S. is up by one point, from 714 in Q3 2022 to 715. And the numbers for FICO® Scores by range are encouraging, too -- just 28.7% of Americans have a credit score in the "poor" or "fair" range (300–669). That means that most people are sitting pretty at "good," "very good," or "exceptional" (670–850).

FICO® Scores, specifically, are one of the most popular scoring models -- when you apply to borrow money (such as via a credit card, personal loan, or a mortgage), it's overwhelmingly likely that the lender will check your FICO® Score. This score is based on five factors:

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1. Payment history: 35%
2. Amounts owed: 30%
3. Length of credit history: 15%
4. Credit mix: 10%
5. New credit: 10%

What can a "good" (or better) score do for you?

Your credit scores matter in a big way for your finances, even if you don't intend to borrow money. In some places, your credit is checked in the process of getting hired for a job or buying car insurance. If you sign up for utility services at your house or apartment, you might have to pay a deposit to get electricity or water turned on if your credit score is too low.

If you intend to borrow money, your credit score matters even more because it has a direct impact on the interest rate you'll pay -- and with a lower credit score, you may not be approved at all. Many of the best credit cards, for example, are targeted to applicants with "good" or better credit scores.

And at a time like now, when interest rates are up across the board thanks to the Federal Reserve's attempts to deal with inflation, having a stronger credit score can be even more crucial to have any hope of saving money when you borrow. I just bought a house, and while I'm paying a higher interest rate than I wanted, based on the ultra-low rates available in recent years, I shudder to think how much more I'd be paying for a mortgage without a high credit score.

How can you boost your credit score?

A higher credit score can have a positive impact on your budget when you can borrow money without paying a punishingly high interest rate. As someone who pulled her credit up from "fair" to "exceptional" over the last several years, it's not a great feeling to apply for credit without knowing if you can even be approved -- let alone get a decent interest rate.

My own path to a credit score over 800 involved the following moves -- I highly recommend making them if you can.

• Pay all your bills on time: This is the easiest way of ensuring good (or better) credit -- payment history is the biggest part of your credit score. Lenders want to see that you have a track record of paying back borrowed money.
• Pay down existing debt: I paid off all my debt in 2022 (and now I'm deep in the hole again, thanks to that brand-new mortgage), and I saw a 100-point increase to my credit score in the process. Even if you can't systematically snowball your debt like I did, paying just some of it off will help -- the amounts you owe creditors represent 30% of your FICO® Score.
• Keep old accounts open: Closing old credit cards shortens your credit history, which can impact your credit score. The longer your history of successful credit management, the better your score.
• Open new accounts sparingly: With a higher credit score, the credit card world is your oyster. But resist the temptation to open new accounts frequently -- every time you do, you lose a few points on your credit score when the card issuer runs a hard check on your credit.

It's great news that more Americans have higher credit scores. If your own isn't quite where you want it, focus on the above moves to raise it -- and enjoy lower borrowing costs and a greater chance of approval.