To really understand the credit scoring system and how healthy your own score is, it is actually important to know some other information as well:
1. A FICO score can range from 300 to 850.
2. The national AVERAGE FICO is 678.
3. The MEDIAN American FICO score, however, is higher at 723.
Even middle school math made my eyes glaze over, so if you are anything like me it may help to have a refresher on the difference between "median" and "average" at this point.
"Median" means that half of all credit scores fall below 723 and half of all credit scores fall above 723.
However the "average" score is what you get if you add together every credit score in America, and then divide that total by the number of scores that were added.
Why is the median score of 723 higher than the average score of 678? The reason is because there are more really low scores between 300 and 723, than there are really high scores between 723 and 850. In fact, 60% of scores are between 650 and 799. Of the remaining 40% of scores, more are below 650 than are above 799.
4. Anything below 620 - 650 is considered a poor score. And remember - the lower you score, the higher the interest you are charged, assuming you can get credit in the first place.
5. There is nothing wrong with having an average score of 678. This is a good credit score and lenders will perceive you as unlikely to default and offer you a competitve interest rate.
6. A score of 770 and up is considered excellent and people with these scores get the very best deals. However, the advantage between having a score of 800 versus 700 is minor compared to the difference between having a score of 700 versus 600.
7. At below 550 you would be considered to have damaged credit and be in need of credit repair.
In short, aim to get above the FICO score average of 678, but don't sweat it. The average FICO score is still definitely good credit and enough for you to qualify for standard rates.
30% of your score is based on your debt to credit ratio so a fast way to improve your score is to apply for another card, giving you more available credit. However, this only works if you don't run up the card - otherwise it can backfire and hurt instead of help.