Where you live can go a long way in determining your credit score.
With a low poverty rate and high employment, Minnesota residents have an average credit score of 724, significantly higher than even wealthier states like California and New Jersey, according to a recent WalletHub report based on TransUnion data.
In fact, Minnesota residents have the highest average credit scores of any state nationwide, followed by New Hampshire, Vermont and Massachusetts, WalletHub found.
Meanwhile, Mississippians had the lowest credit scores in the nation — 662 — along with Louisiana, Alabama and Arkansas, despite a relatively low cost of living.
The national average credit score is at an all-time high of 716, unchanged from a year ago, according to a separate report from FICO, developer of one of the most widely used lender scores. FICO scores range from 300 to 850.
But it’s the first time since the Great Recession that scores haven’t improved year over year, according to Ethan Dornhelm, FICO’s vice president of scores and predictive analytics.
“We’re going back to pre-pandemic norms, which in itself is not a red flag,” Dornhelm said, despite “this slight deterioration in debt levels.”
“What we’re watching is if it’s going to get worse,” he added.
As prices rise across the board, Americans are actually falling deeper into debt.
And yet credit scores don’t change, despite a spike in the cost of living that has caused credit card balances to 15% jump along with an increase in missed payments.
In April 2022, average credit card usage was just over 31%, up from 29.6% a year earlier.
Your utilization rate, the ratio of debt to total credit, is one of many factors that can affect your score. Credit experts generally advise borrowers to keep revolving debt below 30% of their available credit limit the effect that high balances can have.
“We’re watching closely what the next six months bring,” Dornhelm said.
There are a lot of factors at play, he added, including inflation, labor market and housingalong with the withdrawal of government stimulus programs from the Covid era, incl payment pause on most federal student loans by December 31st.
Generally speaking, the higher your credit score, the the better off you are when it comes to getting a loan. You are more likely to be approved, and if you are, you may qualify for a lower interest rate.
A good score is generally above 670, a very good score is above 740, and anything above 800 is considered exceptional.
An average FICO score of 716 means that most lenders will consider your credit score “good” and are more likely to extend you lower rates.
The average national credit score bottomed out at 686 during the housing crisis more than a decade ago, when foreclosures spiked. They rose steadily until the pandemic, when government stimulus programs and a surge in household savings helped the score jump to an all-time high of 713.