Americans appear to have rather high credit ratings overall from east to west, however, these credit figures differ from state to state with just 1.6% of the 232 million American consumers with credit scores having a perfect 850.
As of the first quarter of 2023, the average credit score in the midwestern state is 726, per WalletHub’s November study. With that score, Washington, DC and all 50 states have the highest ranking.
WalletHub’s investigation shows that the average credit score of citizens in Mississippi is the lowest, at 673. Californians and New Yorkers have average credit scores of 707, which puts them in the middle.
Numerous underlying variables, including differing income levels, educational possibilities, employment rates, and other economic situations, can influence how people manage their credit and hence contribute to the diversity in scores across the United States.
“Minnesota tends to score well (and better than Mississippi) on many economic indicators, and the average credit score reflects the generally stronger economy in Minnesota,” Thomas Hanson, an assistant professor of finance at Minnesota State University Moorhead, says in WalletHub’s study.
According to WalletHub, these are the US states with the highest and lowest average credit scores.
Highest
Minnesota 726
New Hampshire 724
Vermont 721
Washington 719
Massachusetts 719
Wisconsin 718
N Dakota 718
S Dakota 718
Hawaii 716
Montana 716
Lowest
Mississippi 673
Louisiana 677
Alabama 680
Arkansas 681
Texas 681
Oklahoma 682
Georgia 683
Kentucky 688
Nevada 688
W Virginia 688
Why you don’t need a ‘perfect’ credit score?
The range of your credit score, as determined by the FICO scoring mechanism, is 300 to 850. It helps lenders assess how dangerous it would be to lend money to you and how well you handle your debt. Experian claims that although Mississippi’s average score of 673 is lower than that of other states, it is still considered an excellent score.
The credit score ranges that Experian labels as bad, fair, excellent, very good, and outstanding are listed below.
Poor: 300 to 579
Fair: 580 to 669
Good: 670 to 739
Very good: 740 to 799
Exceptional: 800 to 850
While having a “perfect” 850 credit score is generally just going to earn you “bragging rights,” those with credit scores above 700 are usually eligible for the best loan conditions and interest rates. The manager of consumer advocacy and education at Experian, Christina Roman, tells CNBC Make It.
In the long term, a high score can save you money. This is due to the fact that a high credit score indicates to lenders that you are a creditworthy borrower, increasing the likelihood that they will offer you the best possible interest rates on your credit card or mortgage.
“With a prime credit score, you may be able to access better offers, including low-interest rates and no fees on credit cards,” Roman says. “Consumers with subprime credit scores are usually required to pay larger deposits and may be faced with higher interest rates.”
However, if your credit score isn’t where you’d like it to be, don’t freak out. Financial experts often advise that maintaining low outstanding amounts and regularly paying your payments on time will help you raise your credit score.
According to Roman, understanding how your credit score is determined will help you make improvements to it. Since your payment history makes up 35% of your credit score, missing or late credit card payments might negatively impact your score.
“One of the best things you can do to improve your financial health and credit is to get engaged,” Roman says. “Don’t be afraid to look at your credit report and understand what’s there.”
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