Photo by Creditnet.com
Following the most recent statistics, an increasing number of Americans get concerned about rising amounts of credit card debt and the scores they have. Over 85% of consumers track their credit-related standing, regularly checking their scores, limits and other issues. According to the new survey by Discover Financial Services, credit awareness has jumped 12% this year. Moreover, a considerable number of people are working hard on improving their scores.
What is the reason for such a tendency? Researchers have discovered that the average credit debt of an American household is around $5,700, and it considers credit cards only. The combined data collected from the Federal Reserve and the U.S. Census Bureau give an opportunity to learn some key facts about the importance and significance of credit for the U.S. population:
- The average household debt reaches around $5,700;
- The total U.S. consumer equals $3.9 trillion;
- Over 41.2% of households carry minor or significant credit debt;
- Households, which have the lowest net worth, have around $10,300 debt.
The above-mentioned proves the fact that credit is a vital part of the American life. The tendency of borrowing money for minor and big deals is growing, so the significance of credit scores increases rapidly as well.
Benefits Associated with Good Credit Scores
The importance of a high or at least average credit score can be explained by the benefits provided for customers, such as the following:
- Low-interest rates. When you borrow money, an interest rate is what matters the most. At this point, it is necessary to mind the tight relation between the interest rate and your credit score;
- Better chance for loan or credit card approval. Lenders usually consider a group of factors before approving the borrower. The income rate, debt and credit score matter much;
- Higher limits available. Customers with high credit scores are considered to be reliable borrowers, who pay back before the due date and in full amount. Those with poor credit history may qualify for a loan, but with a considerable limit.
In addition, people with high scores can expect better car insurance rates, more negotiating power, easy approval for renting apartments or houses, bragging rights and many other advantages.
Good and Bad Credit Score: How to Achieve the Desired Preferences?
Before getting concerned about your credit history and score, you need to learn the rates and classifications. The rates might vary depending on the lender, but on average, the scale is as follows (according to the credit health survey by Discover conducted in 2018):
- Exceptional – 800-850;
- Very good – 740-799;
- Good – 670-739;
- Fair – 580-669;
- Poor – 300-579.
The results of this survey show that over 61% of customers look for effective ways to increase their scores. Greg McBride, the Chief Analyst at Bankrate.com, specifies the following ways to enhance credit history and improve the score:
- Timely payment of bills;
- Keeping the debt modest;
- Getting the annual report from TransUnion, Experian or Equifax;
- Staying up-to-date with your credit standing.
These are simple but important tips on how to improve your credit score. Learning the report will not help directly, but it is a beneficial way to check all the information and exclude any errors. On the other hand, bringing down your debt is a dependable way to enhance the credit score. When you take less than 30% of available credit, the loan doesn’t count negatively. When you decrease the rate to 10%, you start contributing to the improvement of your credit score.