Editor's choice: Experian Credit Report
- Free FICO Score
- Credit alerts and monitoring
- Report & score updated every 30 days
Finder is committed to editorial independence. While we receive compensation when you click links to partners, they do not influence our content.
10+ facts about credit scores that most Americans don’t know
Did you know you've got more than one credit score? Also, don't close that old credit card account just yet.
Credit Score Guides
Protect Your Credit
Sign up & start saving!
Get our weekly newsletter for the latest in money news, credit card offers + more ways to save
In 2018, the average credit score in the US is just under 700. But how much do Americans really know about credit scores?
Before we put in our two cents, scroll down our list of credit score facts and see what you know — and what you don’t. So, without further ado, here are some of the most surprising facts that most Americans aren’t aware of when it comes to their credit scores.
1. There are 5 factors that can impact your credit score
If you’re trying to maintain or improve your score, you should know what piece of the pie these five factors account for when calculating your score:
- Payment history (35%)
- Account balances (30%)
- Credit history length (15%)
- Types of credit (10%)
- Credit inquiries (10%)
2. A credit report isn’t a credit score
Sure, they’re associated with one another, however, your credit score is determined by the information in your credit report. Your credit report is a breakdown of your credit management activity — payment history, open and closed accounts, debts you have, your credit limits and more. All of those factors come into play when calculating your credit score on a scale from 300-850.
Interested in what your credit score is?
3. The credit scoring system was founded in the 1950s
That’s a long time ago, however, credit scores didn’t actually catch on until the 1970s. Before Bill Fair and Earl Isaac came along and founded FICO, to get approved for credit you’d have to meet with a banker or lender face to face and convince them that you were a trustworthy borrower.
4. Your credit score impacts more than your ability to borrow
Looking to rent apartment? Don’t be surprised if the landlord asks to run a credit check to see your credit score to gauge how you’ve managed your finances in the past. Also, lower credit scores tend to go hand in hand with higher car insurance premiums.
And while employers can’t check your credit report without your permission, your credit score is one of the factors they may be interested in when researching potential candidates.
5. Maxed credit cards can damage your score
Have you heard the term, credit utilization ratio? This refers to the balance you have on a credit card compared to the limit.
Let’s say your limit is $2,000 and you have a balance on $1,500 — you have a 75% credit utilization ratio. That could potentially drop your credit score if your credit report is ran while that balance sits on your card. Experts recommend to keep your credit utilization ratio under 30%.
6. Credit scores weren’t designed for consumers
Credit scores were implemented to help lenders make calculated decisions on whether to approve or deny a consumers application for credit.
So that means your credit score matters a whole lot — especially if you plan on applying for a credit card, or taking out an auto or home loan in the near future.
7. You probably have more than one credit score
It’s not as confusing as it sounds. There are three nationwide credit reporting bureaus — Equifax, Experian and TransUnion — and they all may have slightly different information on your credit file.
8. It’s possible for you to have no credit score
Not everyone has a credit history, in fact, the Credit Financial Protection Bureau reports that 1 out of 10 American adults are credit invisible. If you think you might fall into that statistic, don’t fret, there are steps you can take to build your credit history to get on the radar.
9. Closing your accounts can lower your score
The longer you’ve had an account open, the lengthier your credit history. If you were to close your oldest account, you could possibly see your score drop a few points.
Also, by closing accounts with little or no balance, you’d be shrinking your credit utilization ratio.
10. A college degree won’t make your score any higher
Your credit score has nothing to do with how far you’ve climbed up the ladder of academia. The only thing that matters is how you manage your credit — although a degree in finance may help you successfully juggle your accounts.
11. Checking your credit won’t damage your score
There’s a difference between soft and hard credit pulls. Checking your own credit is a soft credit inquiry, so there’s no damage done.
But what can slightly damage your credit score is making a series of hard credit inquiries at once — think credit cards, auto and home loans. Hard inquires stay on your credit report for 24 months and have the potential to shave a few points off your score for each inquiry.
12. Improving your score isn’t impossible
People who’ve filed for bankruptcy or have had their possessions repossessed may think that their credit score is irreparable, that’s not true. It may take some time for these black marks to disappear from your credit report, but once they do, you can learn from your mistakes and start working towards a healthy financial wellbeing.
Get a deeper understanding of your credit score
More guides on Finder
-
CreditLend short-term loan connection service review
Find a line of credit — even if you don’t have a perfect score.
-
Petal launches new card for those with poor credit, refreshes old card
Have a credit score around 550? Struggling to qualify for an unsecured credit card? The new Petal 1 “No Annual Fee” Visa Credit Card might be for you.
-
Mountain America Credit Union private student loans review
Its fully online application sets it apart from other community credit unions, but its rates and terms aren’t exactly competitive.
-
What you need to know about loan forbearance during COVID-19
This financial hardship option can help when deferment isn’t an option, but it will cost you.
-
What should you do after your credit card application is denied?
Have you been ‘friend-zoned’ by every credit card you long for? Read what the experts have to say about pivoting towards success after your credit card application has been rejected.
-
Credit builder loans can increase your score — if you don’t already have debt
A CFPB study found that borrowers who already had debt when they took out a credit builder loan saw lower scores — but higher savings.
-
New FICO score predicts how well you’ll weather this downturn
FICO Resilience Index is good news to responsible borrowers with lower credit scores.
-
COVID-19 help isn’t supposed to affect your credit; here’s what to check for
There are several ways lenders can mess up your credit report, but these are the most common.
-
The states most at risk to identity theft and credit card fraud ranked
If you’re not a fan of fraud, learn what states to avoid living in, including the top 10 metropolitan areas with the highest and lowest levels of identity theft.
-
What is the average credit score in America?
Finder analyzes data to determine what the average credit score is by state and if higher education converts to higher credit scores.
Ask an Expert