Is your FICO score above or below the American average?

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According to research from the great credit repository Experian, as of November 2009, the average credit score in the United States was 692. Experian uses the Fair Isaac or FICO risk model, which is a credit scoring model. The scale goes from 300 to 850. Today, a 692 is considered a B+ score. You need 720+ to get an A and 740+ to get an A+. 697 is considered “very good” and you can still get a loan with a fairly good interest rate.

Once you achieve a score of 720, you are in the “excellent” range and can definitely qualify for loans with the best interest rates available. This is why it is so extremely important to stay on top of your credit and have a good understanding of how credit scores really work. Knowing your current status and setting goals for your future status can help you save literally thousands and thousands of dollars in interest, depending on how much you end up borrowing.

When it comes to mortgages, if you have a credit score above 620 and can provide proof of enough income to comfortably handle all of your debt, you should be able to get an FHA mortgage. But FHA loans come with 2 types of insurance that must be paid: mortgage insurance premiums (MIP) and private mortgage insurance (PMI). MIP is an amount that is normally financed in the loan. 1.75% of the amount borrowed is executed. PMI will generally execute .5% of the loan annually.

If you have an average American credit score, you can be content with that and accept the fact that you’re paying a little more in your interest rates, or better yet, you can start working on your score to take it up a notch. level that will qualify you for lower rates.

There are many ways you can improve your credit score.

First of all, the easiest way to establish better credit is to pay all your bills on time. The timeliness of your bill payments accounts for 35 percent of your total credit score.

You should also try to keep your balances below 50% of your available credit. The lower the better. This calculation, averaged over all your open accounts, represents 30% of your credit score.

The next item to consider is how long you have had accounts open. The longer an account’s history, the more it will help your credit (provided payments are made on time). While there is not much you can do to change the length of your credit history, one thing you definitely should NOT do is close any accounts that have always been in good standing. This certainly helps the elderly more than the young, but suffice it to say: if you have a few bills that pay well, keep them! If you have teenagers, work with them to start building a good credit history at an early age.

Having many sources of credit is usually a good thing, as long as they have been well managed, meaning all payments have been made on time. This aspect can represent up to 10% of your score.

Avoid signing up for multiple credit cards in a short period of time. This will generate inquiries on your credit report. One query by itself is not bad, but having many queries can lower your score. Limit applications to what you really need, and definitely don’t apply for a credit card just because you get an application in the mail. Remember, pre-approved just means you live in a neighborhood where some of your neighbors exhibit timely credit payments, that’s all.

So, what do you say? Are you better off or worse off than the average American?

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