Here's What Americans' FICO® Scores Look Like -- How Do You Compare?

The average American has a FICO credit score of 706. But unless your credit score is exactly 706, this doesn't tell you much about where you stand. Wondering how you compare with other American consumers? Here's a look at the current distribution of FICO scores, and some guidelines that can help you interpret what your score means.

Here's the distribution of FICO credit scores

The highest credit score is 850, but even some of the best credit scores don't reach that. If you know your own FICO credit score, you may wonder where you stand relative to the rest of American consumers. And if you don't know, take a moment to check using one of the many free ways to check your credit score (FICO credit scores are issued by the Fair Isaac Corporation--and you can find your credit score directly from their website, too). Motley Fool Money recently conducted a study showing the distribution of various credit scores by age, state, income, and more. Here's where American consumers stand:

Data Source: Motley Fool Money report: Average Credit Score in America. Data current as of 2019. Published March 2020.

The average American credit score

The average FICO score in the United States is 706. But this varies based on a variety of factors. Most peoples' credit score tends to increase with time. Some states have higher or lower average credit scores, too. For example, Minnesotans on average have the highest FICO credit scores in the nation at 733.

As of this report, 55% of Americans have a FICO score of 740 or higher. This has historically been the case, but the decade of steady economic growth since the Great Recession has caused Americans' credit profiles to improve significantly. Credit scores are higher when fewer consumers have serious delinquencies (or other issues) weighing down their scores. The state of the economy can influence whether or not people are financially able to avoid credit score pitfalls from year to year.

What is the highest credit score?

For most situations, 850 is the best FICO score possible. It's extremely difficult to reach a perfect credit score, though. Only 20% of Americans have a credit score of 800 or higher. Even if you're one of the people with the best credit score in the country, you might not reach 850.

Wondering how to get a 850 credit score? Here are some ways to improve your credit score -- and move closer to the highest credit score you can get:

• Paying off your credit card balance every month
• Correcting errors on your credit report
• Keeping an old credit card open, even if you don't use it often
• Paying your bills on-time
• Requesting an increase to your credit limit

If you reach a FICO credit score of 800 or higher, you should congratulate yourself. Raising your credit score takes hard work, dedication, and patience. Even if you don't have perfect credit, an excellent credit score is something to be proud of.

What is a "good" credit score?

The data in the chart tells you how you stand relative to other American consumers, but it doesn't tell you what lenders consider to be a good credit score.

There's no specific threshold above which a credit score is considered to be "good." Different lenders prefer their borrowers to have different minimum credit scores. What one borrower considers to be excellent credit may not quite meet the standards of another.

With that in mind, FICO does provide some general guidelines to help you interpret your own credit score:

Data Source: www.myFICO.com.

What does your credit score mean?

Your credit score measures how often you pay bills on-time (payment history), how close you are to your credit limits (credit utilization ratio), and how much experience you have with managing debt (credit history and credit mix).

A higher credit score can give you more options for borrowing money. It also qualify you for low-interest loans, which can save you tens of thousands of dollars in interest.

What is a good credit score for credit cards?

The best credit card offers are typically reserved for consumers with excellent credit. Still, there are plenty of great credit card products that frequently accept consumers with good credit, or even fair credit. Consumers with poor credit are typically restricted to secured credit cards. These cards can help rebuild credit over time.

What is a good credit score for a loan?

If you need a car loan or a mortgage, it's another story. Lower credit scores are often able to borrow money for these purchases. However, they'll be at a major disadvantage when it comes to the interest rate they get.

The minimum FICO score required for conventional mortgage approval is 620. You can get a mortgage with this credit score, but you might have to pay more in interest. For example, as of this writing:

• The average borrower with a score of 620 can expect an APR of 5.084% for a 30-year loan
• The average borrower with a score between 700 and 759 can expect a much lower APR of 3.717% for the same 30-year loan

To put this into perspective, with a $200,000 mortgage, the lower-credit borrower would pay an additional $58,120 in interest over the term of the loan.

Because of these factors, it's important to pay attention to your credit score. Even though it's hard to get a perfect credit score, if you work towards the best credit score you can get, your wallet will thank you.