Credit Scores Hit New Highs — Learn How to Boost Yours

The average FICO credit score has officially recovered from the Great Recession.

The latest statistics from Fair Isaac Corp., or FICO, show that the national average FICO credit score reached 700 in April. That’s about 10 points higher than it was prior to the recession — and the highest it has been since FICO started tracking the statistic more than a decade ago.

Additionally, the latest statistics show that the number of consumers with a FICO score of 800 or higher has surpassed the number of consumers with a score of 600 or below.

The most commonly used FICO credit scores range from 300 to 850.

FICO attributes the latest milestones to multiple factors:

• Stable growth of the U.S. economy since the Great Recession
• Increased consumer awareness about FICO credit scores
• A continued steady decrease in the share of consumers who have recent serious delinquencies (90 or more days past due)

How to improve your own FICO credit score

The first step in improving your credit score is knowing where it stands. If you haven’t checked your FICO score recently, read “8 Ways to Get Your FICO Score for Free.”

To improve any credit score, it also helps to understand how it’s computed.

The most commonly used FICO credit scores are heavily influenced by two factors:

• Payment history, which accounts for 35 percent of these scores
• Amounts owed, which accounts for 30 percent

No other factor accounts for more than 10 or 15 percent of FICO credit scores.

Payment history

Perhaps the most important element of payment history is whether your credit payments have been made on time. Such payments include those for:

• Credit cards, including retail store credit cards
• Installment loans, such as car loans
• Mortgages

Even one late payment can negatively affect you in various ways, as we detail in “Will One Late Payment Wreck My Credit Score?”

A good track record of timely payments will help increase your FICO score, though. As FICO says of the continued steady decrease in serious delinquencies reflected in its latest data:

“Since payment history comprises roughly 35% of the overall FICO Score calculation, this sustained reduction in recent delinquency is clearly a key driver of the ongoing upswing in the FICO Score distribution.”

Amounts owed

Amounts owed refers to the amount of outstanding balances on installment loans and revolving accounts such as credit cards.

In the context of revolving accounts, “amounts owed” is sometimes also referred to as “credit utilization ratio” — which is a ratio of how much credit is available to you compared to how much of it you are using at a given time.

The weight given to amounts owed is why we often remind you that you generally should not close accounts of credit cards you are no longer using. From “12 Surprising Ways to Wreck Your Credit Score“:

“Closing a credit card account sounds smart, but it can hurt your credit score. Losing a portion of your available credit increases your credit utilization ratio … An increase in this ratio has a negative effect on your score.”

For more ways to improve your credit score, check out “Boost Your Credit Score Fast With These 7 Moves.”

Has your credit score been on the rise along with the national average FICO score? Let us know below or on Facebook.