Nowadays, getting a loan is a complex process. One of the most important factors in this process is the credit score. The three digits decide your fate regarding homeownership. The lower your credit score, the higher the interest rate will be on the mortgage.
35% of your payment history, 30% of your debts, 15% of your credit history length, 10% of new credit, and 10% of credit types make up your credit score. The one thing lenders are concerned about is your ability to repay the loan. They determine this by looking at your credit score and employment history.
Here are the five credit score categories according to the FICO Model:
- Very Poor: 300 to 579
- Poor: 580 to 669
- Fair: 601 to 660
- Good: 670 to 739
- Very Good: 740 to 799
- Exceptional: 800 to 850
Based on this, a lender files a borrower into a category and decides the interest rate they are eligible for. To get the ideal interest rate, you need to have a Good credit score between 670 and 730.
The good news is that every state has a different average credit score. As a result, a house costing $300,000 in Alaska might cost the same in California, with the same credit score. Let’s that a look at the average credit score of all 50 states in the US:
Average Credit Score by State
| State | Average Credit Score |
|---|---|
| Arkansas | 694 |
| Alaska | 717 |
| Alabama | 691 |
| Arizona | 710 |
| Colorado | 728 |
| California | 721 |
| Connecticut | 728 |
| District of Columbia | 717 |
| Delaware | 714 |
| Florida | 706 |
| Hawaii | 732 |
| Georgia | 693 |
| Iowa | 729 |
| Idaho | 725 |
| Indiana | 712 |
| Illinois | 719 |
| Louisiana | 689 |
| Kentucky | 702 |
| Kansas | 721 |
| Maine | 727 |
| Massachusetts | 732 |
| Maryland | 716 |
| Montana | 730 |
| Michigan | 719 |
| Mississippi | 681 |
| Minnesota | 742 |
| Missouri | 711 |
| Nebraska | 731 |
| New Hampshire | 734 |
| Nevada | 701 |
| New Jersey | 725 |
| North Dakota | 733 |
| New York | 722 |
| New Mexico | 699 |
| North Carolina | 707 |
| Ohio | 715 |
| Oregon | 731 |
| Oklahoma | 692 |
| Pennsylvania | 723 |
| South Dakota | 733 |
| South Carolina | 693 |
| Rhode Island | 723 |
| Texas | 692 |
| Tennessee | 701 |
Average Credit Score by Generation
As said earlier, a borrower’s credit history also plays a huge role in setting the credit score. Here’s how the average credit score differs by generation and age:
| Generation | Average Credit Score |
|---|---|
| Generation Z (18-24) | 679 |
| Millennials (25-40) | 686 |
| Generation X (41-56) | 705 |
| Baby Boomers (57-75) | 740 |
| Silent Generation (76+) | 760 |
Average Credit Score by Income
How much you earn also has a small impact on whether a lender will approve your loan application. You must submit your paystubs and W-2 Form, which tell the lender if you can keep up with the monthly payments.
| Annual Income | Average Credit Score |
|---|---|
| Low Income | 658 |
| Moderate Income | 692 |
| Middle Income | 735 |
| High Income | 774 |
Average Credit Score by Year
Data reported by collection agencies and lenders help decide how capable borrowers are becoming every year in paying their debts. The average credit usually changes annually based on this information.
| Year | Average Credit Score |
|---|---|
| 2021 | 714 |
| 2020 | 710 |
| 2019 | 702 |
| 2018 | 705 |
| 2017 | 701 |
| 2016 | 699 |
| 2015 | 696 |
| 2014 | 694 |
| 2013 | 690 |
| 2012 | 689 |
| 2011 | 689 |
| 2010 | 687 |
Keep track of your credit score by going through your credit reports to ensure there are no false charges on them. Dispute any negative marking by writing a letter with proof to the credit reporting agency.
