How Many Americans Have Good Credit?

Here's how Americans break down by credit "tier."

The major credit bureaus keep credit files on virtually all adults in the United States, and the information contained in these files is used in conjunction with certain formulas to determine credit scores. The FICO credit scoring model is the most popular, and the average consumer has a FICO® Score of approximately 700. 

With that in mind, the Consumer Financial Protection Bureau recently published a report that contained a breakdown of the percentage of Americans that are in each "tier" of credit scores. Here's a rundown of the data, and how you can improve your credit score if you aren't happy with it.

What is good credit, anyway?

There's no one definition of "good" credit, as the answers can vary depending on who you ask. That said, the company behind the FICO® Score offers these good credit guidelines:

Data source: www.myFICO.com

The CFPB has a slightly different definition, and breaks FICO® Scores down into tiers that a lender might use -- superprime, prime, near-prime, subprime, and deep subprime. In the eyes of most lenders, anyone in the superprime or prime tiers (above 660) is considered to have good credit. In the next section, we'll take a look at the percent of Americans that fit into each of the CFPB's credit tiers. 

How many Americans have good credit scores?

Here's a look at how the credit scores of American adults break down:

Data source: CFPB. Percentages may not add up to 100% due to rounding.

Notice that this chart includes a total of 22% of American adults that don't have a FICO® Score at all. While most adults have a credit file with the major credit bureaus, more than one in five don't have a credit score. In order to be able to generate a valid FICO® Score, there are three things that need to be true:

1. You have an account on your credit report that has been open for six months or more.
2. You have to have an account that has been reported to the credit bureau within the last six months.
3. Your credit report cannot indicate that you are deceased.

In a nutshell, in order to have a FICO® Score, you need to use your credit (and be alive). 

However, the knowledge that 22% of people do not have a score at all distorts the data somewhat. If we just consider the American adults who have FICO® Scores, here's the breakdown.

Data source: CFPB. Percentages may not add up to 100% due to rounding. 

So, more than half of American adults with credit scores are in the "superprime" credit tier, and nearly 70% have scores that would generally be considered good. 

Tips to maximize your own credit score

The most important thing you can do to help maximize your own credit score is to understand where your score comes from. And while the FICO scoring formula is a closely guarded secret, we know that there are five weighted categories of information:

1. Payment history (35% of your score) -- Do you pay your bills on time every month? This is the single most important factor in your FICO® Score.
2. Amounts owed (30% of your score) -- Also called a credit utilization ratio, this doesn't necessarily mean the dollar amounts you owe, but rather the amounts you owe relative to your credit limits and/or original loan balances. For example, a $1,000 balance on a credit card with a $5,000 limit generally looks better than a $500 balance on a card with a $1,000 limit. 
3. Length of credit history (15% of your score) -- This has a lot of time-related factors, such as the average age of all of your credit accounts, the age of your oldest and newest accounts, and more.
4. New credit (10% of your score) -- If you apply for new credit or open a new account, it's generally a negative factor. Credit applications (inquiries) can adversely affect your score for up to one year.
5. Credit mix (10% of your score) -- A diverse mix of credit account types is better than if you only have one or two. For example, having a mortgage, an auto loan, and a credit card account could be better than just having three credit cards. The idea is that lenders want to see that you can be responsible with all types of credit.

Obviously credit improvement is a huge topic in itself. However, if you understand how the formula works, you can identify the areas where you could use improvement. And if you're looking for some tips, here's a list of suggestions to get you started.

Why good credit is important

Having good credit not only makes it easier to buy a house or car, get an apartment, or get a credit card, but it can make these things much cheaper as well. Just as an example: If you get a $150,000 30-year fixed-rate mortgage, a FICO® Score of 740 can save you more than $12,000 in interest compared to a buyer with a "decent" score of 670 based on the current national average APRs (3.45% vs. 3.81%). In a nutshell, good credit is one of the best investments you can make.