With the average credit score in the U.S. being 695 using the VantageScore model, just below the start of the excellent credit range, a new study analyzed the average credit scores of residents in all 50 states and released 2022’s States with the Highest & Lowest Credit Scores.
For instance, the average credit score in California is 703, which ranks 24th highest in the U.S. Readers who are curious to know how they compare with the average person in their state can access their free credit score by joining the WalletHub community.
Help for Better Credit
Luckily there are some great ways to build credit and get yourself back on track.
“Be patient. Building good credit takes time. You must be consistent with your bill payments. Take the necessary steps to avoid derogatory marks on your credit report. For example, if you are not able to make a payment on time, reach out to the lender, and ask for an extension. If you visit the Doctor’s office, be sure to open all mail that comes from that office to make sure you do not miss a bill. Monitor your credit report to make sure everything looks accurate. Understand how credit utilization, a general rule of thumb is to keep your utilization below 30%, but the closer you are to zero, the better it is,” according to Philip Gibson, Ph.D., CFP associate professor at Winthrop University.
“Make sure you pay your bills on time. For credit cards, pay them off every month and, even if you cannot pay them off every month, keep your balances low. Keep your other outstanding debt lower as well and pay it off. More outstanding debt makes you look riskier to potential lenders. Also, for credit cards, especially for younger people, become an authorized user on someone else’s account like a parent (who has good credit practices),” according to Bradley Allen Stevenson, associate professor at Bellarmine University.
Common Misconceptions About Credit Score
While there are plenty of misconceptions about credit scores, there are some things you can do to change things.
“Although the law changed years ago, some people still mistakenly believe that if they request a copy of their credit report it will hurt their credit score. Obtaining your report to inform yourself about what is on there and to dispute inaccuracies will not affect your score. Another misconception is that you can do nothing in the face of inaccuracies in your report. Consumers have the right to dispute inaccuracies, and the process is not complicated (although it can take some time to resolve the issue). The rate of errors on credit reports is known to be significant. This could be due to identity theft, but it also happens simply because people misspell names when they type in information sent to credit reporting agencies and because computers can confuse two people with the same name. Unfortunately, the law does not give credit reporting agencies and creditors who provide erroneous information sufficient incentive to double-check and avoid such errors on their own, and so the consumer must raise a dispute,” according to Lauren E. Willis, professor, and associate dean for Research at Loyola Marymount University.
“People sometimes think that wealthier people automatically have higher credit scores. Income does not affect your credit score and it does not follow that wealthier individuals have better credit scores. What matters is paying your bills on time and how much debt you have,” Stevenson added.
What are the most common mistakes to avoid when improving your credit score? Many, according to various experts on the subject.
“Closing a credit card account does not positively impact your score. Recall, credit utilization is a major factor in credit score calculation. Closing a credit card account will reduce your total credit limit. Assuming nothing else about your credit history changes, the closing of the account will increase your credit utilization score, which may hurt your credit score. Changing your credit score cannot happen overnight. Typically, it may take 30 to 60 days to see a big change from any actions you took to boost your credit. This means you cannot wait until the week before you want to obtain a mortgage or an auto loan to try and improve your credit … Do not try and open too many new credit or loan accounts at once. Typically, your credit score will be hurt any time a potential lender pulls your credit report … Opening several accounts at once may hurt your score each time a different account lender pulls your credit…Opening multiple new accounts in a short time will reduce your average credit history which can also hurt your credit score,” said Kelsey Syvrud, Ph.D., assistant lecturer; assistant director of the BB&T Center for Free Enterprise at Florida State University.
“Opening too many cards or assuming that your score is going to change overnight. Also assuming that simply downloading an app is going to change it. Ultimately, improving your credit score is driven by changing behavior. Apps or access to your score through a credit card help drive behavior because they put your score in front of you, but no change will occur without better spending patterns and careful management of outstanding debt,” said Curtis M. Nicholls, Ph.D. , associate professor; co-director, Bucknell’s Student Managed Investment Fund at Bucknell University.