70% of Americans Falsely Believe This About Their Credit Scores

Think your credit score is good? So do millions of your fellow citizens. Unfortunately, there is a good chance you are wrong.

Fully 70% of Americans believe their credit scores are above-average — far more than the 45% who really have scores that meet that definition, according to a survey and analysis by PYMNTS.com and Elan, a division of U.S. Bank.

An above-average score is one that exceeds 751, according to national credit reporting data.

Meanwhile, just 8% of consumers think their credit scores are below-average, when in reality 21% of them have scores below 600, the actual range for below-average scores.

Members of Generation Z and people of all ages who live paycheck to paycheck are most likely to incorrectly estimate their score, with a huge, 33 percentage point gap between the share who claim above-average scores and those who actually are worthy of such a rating.

While 62% of respondents say they would like to raise their credit score, the survey found that many lack the education about credit scores to take the steps that might improve their profile.

For example, 39% say having debt on one credit instrument — such as a single credit card — rather than on several will improve their scores.

In reality, your credit utilization rate — your total outstanding debt as a percentage of the total amount of credit available to you — has a bigger influence on your credit score than the total number of credit cards or loans you have.

As we detail in “7 Ways to Boost Your Credit Score Fast“:

“According to Fair Isaac Corp., aka FICO, the company that calculates one of the most widely used credit scores, 30% of your FICO score is based on the amount you owe. However, it’s not simply how much you owe that’s important. It’s how much you owe compared with how much credit you have, a ratio known as your credit utilization rate. For example, if you have a $10,000 credit limit and a $5,000 balance, your credit utilization is 50%. …

There are many theories on the ideal credit utilization rate, but Experian suggests it’s best to have a rate of less than 30%. In other words, you should never have more than $3,000 charged at any time if you have a $10,000 limit.”

Are you unsure of how to raise your credit score? A little education can get you on the right path. For more, check out “How I Got a Perfect Credit Score in 4 Steps.”