Is your state one of them?
Your credit score follows you from the day you open your first credit card or take out your first loan until the day you take your last breath. Lenders use it to decide whether to work with you, sometimes landlords use it to screen out potential tenants, and even your cell phone provider can verify it when you sign up. It’s the note you never stray from. But keeping a high level is not always easy.
While average credit scores in the country have risen steadily over the past decade, according to the results of The Ascent’s latest research on credit scores in america, some states still struggle with poor credit. Five in particular stood out with average VantageScores below 660.
The five states with the worst average credit scores
The five states with the worst average VantageScores in the nation are:
- Mississippi (652)
- Louisiana (653)
- Georgia (659)
- Nevada (659)
- Texas (659)
Interestingly, four of those five states are in the south, and if we expand the list to the 10 worst average credit scores, four more southern states – Alabama, Oklahoma, Arkansas, and South Carolina – do.
While each lender has their own credit score groups, VantageScore itself defines a credit score of 601 to 660 as “quasi-prime” and a score of 600 or less as “subprime.” These borrowers are less likely to be approved for credit cards and loans because their credit scores indicate that they have not been financially responsible in the past and may not be able to make their payments. If approved, they will likely pay a higher interest rate to offset the increased risk to lenders. It can cost them hundreds or even thousands of dollars more over the life of a loan.
How to improve your credit score
It is difficult to pinpoint the exact reasons for the low credit scores in the above five states – and it is possible that it is a combination of many factors. Interestingly, credit card debt doesn’t seem to be one of them.
None of the states listed above had unusually high credit card debt amounts in The Ascent’s study of credit card debt statistics, and in fact, Mississippi has the sixth lowest average credit card debt in the country. While there doesn’t seem to be an easy explanation as to why these five states struggle more with poor credit than the rest of the country, the solution is the same.
The most important thing you can do for your credit score is to always pay your bills on time. Payment history represents 35% of your FICO® score and about 40% of your VantageScore, because it has been shown to be such an accurate indicator of future financial behavior. Late payments can lower a great FICO® score by 100 points or more and stay on your credit report for seven years, although their effect wanes over time. Regular, on-time payments will boost your credit score, but it may take a little while before you see the results, especially if you have any behind your file.
The second most influential factor in your credit score is your use of credit report. This is the ratio of the amount of credit you use each month to the amount you have available. Keeping your ratio below 30% is crucial as a higher ratio indicates heavy reliance on credit and scares lenders.
Reducing your credit utilization rate is pretty straightforward. Load less on your credit card every month or pay your bill twice a month. Credit bureaus only see how much you owe at the end of each billing cycle, so by paying off your card halfway through the month and again at the end, you can spend more without hurting your usage rate. credit.
Other things you can do to improve your credit score include applying for new credit accounts and closing existing credit accounts sparingly. You should also check your credit reports for any inaccuracies and notify the credit bureau and financial institution associated with the account if you find any. They’ll need to investigate, but if they find you’re right and the issue is negatively impacting your credit score, legally they need to fix the issue. Everyone is entitled to one free credit report per bureau per year thanks to AnnualCreditReport.com, so there is no reason not to verify yours.
Everyone wants a quick way to increase their credit rating, but it doesn’t exist. Credit scores were meant to provide a long-term overview of your financial history and they wouldn’t be much use if you could increase them significantly in a day or a week. It takes sustained, responsible financial habits to make a real difference in your credit score, but it’s worth it. A good credit score opens many doors – and can save you a lot of money, too.