The State of American Credit Health in 2019

Credit may not be one of the most engaging topics of conversation, but it undeniably plays a major role in several aspects of consumers’ lives. From monthly budgeting to auto financing to home financing, credit is an ever-pervasive and crucial element. For this reason, it is important to understand how credit works, your own credit health, and the credit health of the nation as a whole.

What Americans Know About Credit

Good credit health begins with understanding credit in the first place and what factors affect it. To gain insight into consumers’ understanding of credit, Discover surveyed more than 2,000 individuals. What the findings revealed is that while credit awareness is on the rise, consumers still don’t fully understand the factors that influence a credit score. The demographic with the least amount of understanding appeared to be millennials.

When asked, only 20% of respondents were able to correctly identify all five of the primary factors that play a major role in credit score: Credit utilization, payment history, new credit, length of credit history, and total accounts open. 52% of respondents knew that payment history was a major contributing factor, while little more than 25% said they knew credit mix impacted their credit rating.

28% of those with a complete understanding of credit rating factors were baby boomers. 19% were members of Generation X, while just 12% were millennials. 91% of baby boomers demonstrated a keen credit awareness, compared with just 77% of the youngest adult population.

The Average Credit Score in America

According to one report, American credit health is better than ever. The average FICO score is 700, a historic high. This is indicative of several things.

For one, it shows that Americans are taking better care of their credit health. Two, it indicates that they’re getting smarter about spending, living within their means, and making payments on time. Finally, it’s indicative of a good economy, as more consumers are able to get favorable rates. Together, these signs suggest that maybe it is possible to learn from the past.

Your Credit Scores

Most Americans are aware that the three national credit bureaus — Experian, Equifax, and Transunion — all calculate scores differently and publish them separately. These bureaus use both the FICO and VantageScore scoring models, both of which have credit ratings that range from 300 to 850. However, your FICO and VantageScore scores are not the only scores you have.

You actually have 49 different FICO scores, all of which focus on different lending requirements. While a mortgage lender might look at your Generic FICO Score to get an idea of the type of borrower you are, it may want to look more closely at, say, your FICO Mortgage Score, which can give it insight into how well you’ve dealt with prior mortgage debt (if at all). Likewise, an auto dealer may look to the FICO Auto Score, and a credit card company to the FICO Bankcard Score.

Though your Generic FICO Score is the most used score, you should make sure that your credit health is good across all 49 scores, plus VantageScore. You never know what type of score a lender will use to decide whether you’re a worthy borrower, so it’s better to be safe than sorry.

Average American Credit Card Debt

It’s all well and good that the majority of Americans have healthy credit scores, but what about debt-loads? Americans are notorious for living beyond their means, and for taking on more debt than they can reasonably manage. Is that still the case?

According to ValuePenguin, it doesn’t appear to be so. The median credit card debt as of October of 2019 was just $2,300, with an average of $5,700 per household. For comparison’s sake, the average total unsecured debt in 2011 — three years after the start of the great recession — was a whopping $21,281.

Debt averages vary across the nation, economic classes, and race. For instance, the demographic with the highest amount of credit card debt happens to the one with the lowest net worth. Those with a negative or zero net worth have an average of $10,308 in credit card debt. Interestingly, the group with the second-lowest net worth (those with a net worth of between $1 and $4,999) had the lowest average, of $3,946. The households with the second-highest average debt fell into the demographic with the highest net worth ($500,000 and over), for a total average of $8,139.

Residents of the Northeast and West Coast states have the highest average credit card debts. However, Alaska and Wyoming are the two states with the highest household averages. Alaska’s average is $13,048, while Wyoming’s is 13% less.

The “who” of who’s carrying the debt may surprise you. While you might think that women, low-income earners, and the youth would have the most debt, the opposite proves to be true. Though those 75 and up have the lowest debt average of $5,638, millennials take a close second, with an average of $5,808. Those between 45 and 54 years old carry the most debt, at just over $9,000, while the age group below it — the 35- to 44-year-olds — carries the second-most amount of debt.

The lowest income earners in the nation have an average debt amount of $3,000, while the highest income earners have the highest average, of $11,200. The average credit card debt among men is $7,407, while women hold an average of 22% less, at $5,245.

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