Part of being financially responsible is regularly checking your credit report and your subsequent score. To truly analyze what you find there, you will need an understanding of where your rating stands.

What is a good range, and what is average? And how will that affect your life? The answers to these questions will help you make sound financial decisions and better manage your money.

What Is a Credit Rating?

Before discussing the average credit score in the United States, it’s important to know about the range of credit scores. FICO scores are the main credit rating system and they range from 350 to 850. Scores on the extreme side of either end of the range are rare.

What Is the Average Credit Score?

There are different systems used to evaluate credit. The most common system is FICO. According to FICO, the average rating in the United States in April 2017 was 700. In April of 2018, the average has gone up to 704.

The average credit score is rising in the United States. As people are becoming more educated on how important their scores are and how to improve them, ratings are going up.

Why Your Credit Rating Matters

It’s important to understand why your rating matters and why it matters that the national average is rising. You are being graded on a scale when you apply for things.

If you apply for a home loan with a decent rating, but all of the other applicants in your area are applying with much higher ratings, your application has a much slimmer chance of being approved.

The fact that the average is going up in the United States means that the expectations for your rating are going up at the same time.

While many will tell you their opinions on what a good or bad credit rating range is, but the truth is that because you are being judged against your peers, this is a subjective thing. That being said, it is generally true that a score of 700 is a good rating. Most people would say anything over 750 is considered excellent.

6 Times Your Credit Rating Is Being Checked

But the question is whether an excellent score is worth working for. While loans are a reality for most of us, it’s still not an everyday occurrence. Your credit score is being evaluated for more than you may think.

1. When You Apply for Loans

Financial institutions use your credit rating to decide whether you are likely to make your payments on time. While it’s true they will also look at your income and other factors, this is a major part of the approval process.

It also affects what interest rate they offer you. On a small loan, that may seem like a minor issue, but half a percent difference is thousands of dollars on a home mortgage.

2. When You Apply for Credit Cards

Again, your rating will affect whether they offer you approval and what interest rates they offer.

3. When You Apply for Jobs

Yes, many employers now run credit checks. Every employer will have a different opinion on what a good score is and how important that is on your application.

Generally, they are looking to see if you are a responsible person. If you are applying for a job where you will have access to a lot of money, this may be more important than with other jobs.

4. When You Apply for an Apartment

Your rating is a big factor in whether a landlord will accept your application. They may approve your application but ask for a larger security deposit if they find your score is too low.

5. When You Apply for Car Insurance

Many car insurance companies offer people with low scores higher interest rates. This can have a big impact on your monthly payments.

6. When You Get a Cell Phone

Mobile phone providers run credit checks. If your score is low, they may ask for a large deposit in order to offer you a monthly plan. If your score is too low, they will deny your application and you may be forced to use a pay-as-you-go plan, which offers fewer features and deals.

It’s worth noting that the country’s average FICO rating of 700 should be acceptable for a cell phone contract or many of these other circumstances. The further you fall below that average the more difficult these things will become for you.

How Your Credit Score Is Calculated

Financial reporting companies look at your credit report, assign a weight to the various factors found there, and then total them up to create your score.

The main areas that make up your credit score are your payment history, the amount of debt you owe, the ratio to the amount of debt you owe versus the amount of credit available to you, the length of your credit history, what kinds of credit accounts you have, and new credit inquiries.

Remember that not all of these areas are weighted equally. While having too many new credit inquiries over a short period of time will negatively impact your score, that will count against you in a much smaller way than having a late payment.

Rather than focusing on the rating number itself, to get yourself a higher credit rating, look at what you can do to improve these areas. With some effort and time, your rating will naturally rise.

How to Improve Your Credit Rating

Always pay your bills on time. Setting up auto-payment is a good way to make sure this is always taken care of. You should also monitor your credit regularly and always follow up on any problems you find there.

When you can financially handle it, open a few new accounts, like credit cards or small loans, and always pay them on time every month. Having a low amount of debt with a higher amount of credit available to you can positively impact your rating.

Whatever range your rating falls into, always remember that it can change drastically six months from now. Keeping your debts low and paying your bills on time will always be the most important factors affecting your score.