Your credit score is an important part of your financial health, and affects everything from interest rate to the ability to get a loan. Comparison is a natural way to gauge how well we’re doing (or not doing) at something. As such, you may be curious what the average credit score is. Where do you stack up? Is your credit score good or bad? These are common questions in the world of finance. So let’s break it down.

What is the Credit Score Average in America?

The FICO credit score average in the U.S. is 711.

Fair Isaac Corp.’s FICO Score is one of the most widely used scoring models in America. FICO scores range between 300 and 850. A score of 711 is considered good according to this scoring model.

Here’s a look at how different FICO Score ranges are viewed:

• 800 – 850: Exceptional
• 740 – 799: Very good
• 670 – 739: Good
• 580 – 669: Fair
• 300 – 579: Very poor

Why Does Credit Score Matter So Much?

Think of your credit score as your financial snapshot. A high credit score means you are a financially responsible person and your finances are in good standing. This makes it easier for you to get approved for any line of credit including loans, mortgages, and credit cards. The higher your credit score the more easily you will get approved and the lower the interest rate you’ll pay on your loan. You’ll find that an excellent credit score range of 800-850 will open doors for you.

How Is Credit Score Calculated?

Credit scores are calculated using the information contained in your credit report. FICO calculates your credit score using 5 types of information from your report:

1. Payment history – This is the most important factor, accounting for 35% of your credit score. Payment history refers to your history of paying off your credit accounts. Consistent timely payments will add to your score. Late payments or defaults can tank your score.
2. Debt-to-income ratio – Debt-to-income ratio looks at how much of your monthly income you are using to pay off your monthly debt. It accounts for 30% of your credit score. A lower ratio means your monthly credit is higher than your debt, which is good for your credit score.
3. Length of credit history – Length of credit history is based on how long you’ve had credit accounts open. A longer credit history can add up to 15% to your score.
4. Credit mix – This takes into consideration how many different types of credit accounts you currently have. Having a mix of credit cards, mortgages, auto loans and installment loans can add up to 10% to your score.
5. New account inquiries – Every credit card or loan application triggers a hard credit pull. Every hard inquiry hurts your credit score a little bit. Applying for too many new lines of credit can damage your credit score up to 10% of the total.

What Does Your Credit Score Mean?

If your credit score is above 670, that’s good. That doesn’t mean you can afford to be reckless with your finances however. It takes a long time to build good credit but just one delayed payment or default to damage it.

If your credit score is below 669, you have to take steps to improve it. Making all loan and credit card payments on time every month is the single best thing you can do to improve your score. Other things you can do include looking for ways to lower your debt-to-income ratio and keeping old credit cards open. Not applying for new credit cards or loans will also help.