Average Credit Score Tips
The reliance of making transactions through credit has been widespread from the late 80’s. This way of completing transaction grew wider and wider to what it is today. This expanding reliance made the major bureaus employ a scoring system. However, this system was developed three decades even before it came into major use. In the late 1950’s, Earl Isaac, a mathematician, and an engineer, Bill Fair, formulated a system that rates a person financial performance.
Today’s system is being used more than ever since its formulation. This system is based on your performance when it comes to managing both your debts, both long-term and short term, and as well as your bills, and applications for credit cards. Much to the misunderstanding of most people, the scores that are being given by this system are not reviewed by creditors in terms of absolute figures. Instead, they review your score based on relative terms.
Meaning they decide whether they should give you a higher or a lower rate of interest based on your distance from the average credit score. The average score varies according to its scope of calculation (be it from country to country, city to city, or from state to state). This is to say that if the scope of calculation were just in the state of South Dakota, the average credit scores would be different, than it would be if the average would be calculated based on Iowa.
This is where knowing your own score and the average score comes in handy. By knowing your own score and by comparing it to the average, you will be able to budget your income. By doing this, you will also be able to determine whether potential creditors would say that you have a good credit score or not.
It would also help you determine how high or low your interest rate would be should you apply for a loan. A major misconception of most is that the average credit score is always computed by total score over the number of factors. Most of the time, the average score is the median of all the scores on a given state. Meaning, the average rating is the score where there would be equal number of people with higher ratings and lower ratings.
As of now, the latest reported national average credit score by FICO is 728. This means that if you have a rating of 728, there are some 50 million people with better scores than you are, and there are also 50 million people with lower scores than you have. As of 2008, the state with the highest average credit score is Minnesota with 721 and the lowest is from Nevada, with a score of 668.
Your credit score can easily be improved once you take the necessary steps. By requesting your free credit report you will be able to identify and correct errors, false information and inaccurate listings. This will clean up your report to ensure you have a good credit score.
Theres more where this came from. Check out additional ways to improve a credit score and learn how to get a good credit score.