All the negative talk about the American economy has me wondering about the average credit score of Americans. As you may be aware, the U.S. government has faced its own credit downgrade. Did we deserve to be downgraded? Well, our national average seems to be right in line with the decision to lower the country’s financial credibility. The average personal credit score for Americans falls in the middle of the “good” category, quite short of the top grade of “excellent”. Lets start with the scoring.

Credit Scoring

Every consumer who uses credit has a separate score from each of the three major credit-reporting agencies. TransUnion, Equifax and Experian all calculate their numbers using the FICO scoring model. Scores start at a dismal 300 to the apex of excellence of a perfect score at 850.

Taking the three scores together and dividing the total by three will give your average overall score. But for the purposes of lenders they generally use the middle score as a reference.

So for example, if your three scores are 650, 700 and 670, the median score of 670 will be used. On the grade scale below, provided as a guide and not a definitive set of rules, you would earn a solid B and be considered an acceptable risk for most loans.

Score Range Grade
741 – 850 A (excellent)
641 – 740 B (good)
541 – 640 C (fair)
451 – 540 D (poor)
300 – 450 E (just plain awful)

Little Reason to Cheer

Americans are doing moderately well, according to the printed stats, with an average score of 688. This score may fall in the “good” category, but lenders may not see such a rosy picture, as it falls on the lower end of a good grade. Many lenders often consider anything below 620 as ‘poor’, moving a score of 688 to ‘fair.’ Unlike an excellent score, consumers with the current national average may find lenders slow to approve and require collateral or additional money down. While most American haven’t lost total grasp on fiscal responsibility, the need to improve is clearly present and the farther behind you fall the longer it’s going to take to return to a good score.

The Impact of a Few Points

Don’t make the mistake of thinking that a few points won’t make a difference – they can potentially cost hundreds or thousands of dollars. For example, a one-point shift downward in your FICO score from 640 to 639 in the state of Michigan can mean the difference between a $150,000, 30-year fixed mortgage at 4.409% and one at 4.949%. The out-of-pocket difference will cost nearly $50 a month over the course of thirty years.

A surprising finding is that an excellent score of 750, a hundred points short of perfect, will get the same low interest rates as that perfect score. So, for many Americans, making a few changes in how they manage their finances and being patient, may raise their score by the necessary 62 (from 688 to 750) points to be rewarded with better terms in the loans they need in the future…which saves you money.

A Promising Future

A more educated consumer receives the benefit of hard times. They are better prepared for changes in the lenders requirements. We are seeing a shift in how consumers utilize credit. More and more people are no longer living on borrowed money as if tomorrow will never come. Credit scores are becoming a bigger part of the American conscience with more people taking the time to monitor their credit activity.

In the end lenders still have the ultimate decision on how specific credit numbers are viewed. With defaults at near record highs and unemployment still a concern, tighter standards may be the name of the game for some time. What was once considered excellent may now be seen as good. Diligent oversight with how you manage your credit accounts will keep your score high or help increase it. Each person has the ability to help themselves and their country by taking steps to improve the ways they use credit and improving their financial credibility.

Check out how you compare with others of your generation.

About The Author: Noreen Ruth is a contributor for and several other popular finance websites. She is interested in educating consumers about using credit responsibly and about legislative action that will affect their ability to borrow the money they need. She has contributed hundreds of articles to various online sites that provide content to inform consumers on loans, credit cards, debt relief services and other finance related topics. To read more of her continual posts and additional writings, visit the credit news blog.

Thanks for the great article Noreen. Make sure to check out some of her other articles at ASAP Credit Card. If you’d like to write a guest pest on HackingTheBank, shoot me an email.