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What is good creditworthiness? Experts tips to increase their

What is good creditworthiness? Experts tips to increase their

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The loan scores does not matter unless you try to get a loan, rent an apartment, secure insurance, to buy a house, not pay a deposit to supply companies or even land some jobs.

OK. If you don't live from the network, you are really important. The average creditworthiness in the United States is 717, according to Fico, the data analysis company, whose evaluation model is used in most credit decisions. This is considered a good score. But millions of Americans still have difficulty increasing their, and low loan scores can make common life goals much more difficult.

Annamaria Lusardi, who heads Stanford's initiative for financial decisions, said good creditworthiness saves them money because they can secure lower insurance premiums and lower interest rates for loans.

“Only one percentage point difference for a mortgage, even with our car loans, are enormous savings,” said Lusardi. “If we don't have a good number of points, we will actually have no creditworthiness. We are closed by the loan. Therefore I say that the financial system is not forgotten.”

Here is what you know about credit scores and how you can increase yours:

More: Credit reports are more common than they think. Here you can find out how to deny you

What is a creditworthiness?

A creditworthiness is a three -digit number that indicates how likely it is that you pay money back if you borrow it based on your loan story and your data from large credit offices.

“I always describe the creditworthiness of my students as their financial GPA,” said Lusardi. “We have to have the best grade available to signal to anyone who wants to work with us that we are a good borrower. We are a good person with good loan.”

FICO values ​​that are used in 90% of the credit decisions are calculated using five criteria, the weight of each category can sometimes vary depending on the person.

For example, Fico notes that scores for people with short loan stories can be calculated differently than for those who use loan for longer.

How is a creditworthiness measured?

The first and most important thing that influences your score is the payment history. Whether and how you have repaid past credit generally accounts for 35% of your FICO scores.

How much they are currently in debt is the second most important thing that generally makes 30% of their score. While the amount is important, your credit relief is also important. If a person has used all the credit available to them, this can indicate that they are overstretched and likely missed payments with greater probability, Fico states.

The third aspect, the duration of your credit course, generally accounts for 15% of your score. The age of her oldest account, the latest account and the average age of all of your accounts are integrated into your score.

The fourth and fifth categories generally make up 10% of their score. They are the amount of a new loan and their loan mix. Opening several new credit lines in a short time can drop your score, especially if you don't have long credit history.

Your loan mix reflects the different types of loans that you manage. It can include credit cards, mortgages, car payments and more. If you have different types of loans and make payments routinely, this can increase your score.

What is the highest creditworthiness you can get?

The highest possible FICO value is 850. This is a perfect score and it is not always necessary to obtain the best conditions and interest rates when borrowing.

The FICO values ​​are divided into five areas: poor, fair, good, very good and extraordinary. According to Experian, 71% of the Americans have a good number of points or better.

About 13% have a score between 300 and 579, which is in the “bad” area. Another 16% have a score between 580 and 669 that fall in the “fair” area. The next 21% are in the “good” area, which means that you have a score between 670 and 739.

At 28%, the highest percentage of people falls into the “very good” area and achieves a score between 740 and 799. In the “extraordinary” area there are 22% of the Americans who have a score between 800 and 850.

What is the average creditworthiness of generation?

According to other data from Experian, the loan scores tend to increase over time. The average FICO values ​​found in 2024 according to generation:

  • Generation Z: 681
  • Millennials: 691
  • Generation X: 709
  • Baby boomer: 746
  • Silent generation: 760

How do you increase your creditworthiness?

A frequent misunderstanding of creditworthiness is that checking your case comes to a termination. That is not true. The lenders who check their creditworthiness, like when buying a car or a credit card, can reduce for a short time, said Lusardi.

You can often display your own by your bank or credit cooperative and online at myfico.com.

If you try to increase your score, the best thing you can do is pay off the debts, said Lusardi. It also recommends using only about 70% of the loan available to you to avoid spending too much.

With regard to the improvement of your loan mix, Lusardi said that it is important to manage the different types of loans that you currently have well. If you have no student loans, a mortgage or another loan, but have a credit card, you do not recommend opening a new credit line just to increase your FICO score.

“In this case, I would actually not worry,” said Lusardi. “I don't think it is worth opening a new credit line because it is only 10%, and if you have no other debt sources, there is really no reason.”

To maximize the length of your credit story, do not close old credit card accounts, said Lusardi. She also warns of opening several new credit lines at the same time, as this could signal that you have financial difficulties.

Reach Rachel Barber rbarber@usatoday.com and follow her on X @rachelbarber_

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