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Credit

Credit Repair Facts and Statistics



Credit has become integral to how the world works. We use it in our daily lives in many forms, including mortgages, car loans, and credit cards. The amount you can access depends on your credit report and your credit score. That’s why it’s so important to know what these data sources are “saying” about you to potential lenders.

Credit Scores

The Lowest and Highest Credit Scores You Could Get

Credit scores are three-digit numbers ranging from 300–850 that give lenders a snapshot of your financial history. The higher your score, the more financially sound you appear, and the more willing lenders will be to offer you credit.

The following factors go into calculating your credit score:

  • Your payment history
  • The amount of credit you’re currently using
  • The length of your credit history
  • The types of credit you have access to
  • The total amount of credit you have available

What’s a FICO Score and/or a VantageScore?

You’ll often have more than one credit score. This is because the three major credit bureaus—Equifax, Experian, and Transunion—use similar methods to calculate your scores. FICO Score and VantageScore are the two main scoring models used in these calculations.

Lenders use FICO Score and VantageScore to understand your credit risk. Scores in both models have the same range of 300–850. A higher score shows you manage credit well. A key difference between them is that each model weighs the categories on your credit report differently.

For example, FICO Score gives each category a set percentage, while VantageScore ranks each one on how influential it is. The Balance adds, “FICO gives more weight to payment history, while VantageScore’s latest version emphasizes total credit usage and balances.”

Average Credit Scores in the USA

The average credit score in the USA is 698.

How Many People Know Their Credit Score

21–33% of US adults track their credit score monthly.

How Many People Don’t Know Their Credit Score

Around 54% of Americans don’t know their credit score.

Where and How Many Times You Can Get a Free Credit Report

Check your credit report regularly to make sure it’s correct and complete. Annual Credit Report.com allows you to access one free credit report per year from each of the three bureaus. Due to the COVID-19 pandemic, it’s now offering free weekly online reports until April 2022.

Why Credit Scores Matter

Your credit score is a powerful indicator of your ability to repay your debts and whether you manage your money responsibly. It can affect your daily life and your financial decisions in many ways.

Average Credit Score Needed to Buy a House

A poor credit score might mean you can’t finance your dream home, or even if you do qualify for a loan, that you pay an excessive interest rate. The average credit score needed to buy a house is 620. Some lenders offer mortgages to buyers with scores as low as 580, but these often require higher down payments.

Average Credit Score Needed to Rent an Apartment

Landlords generally run credit checks on all new tenants before they sign a lease agreement. If your score is low, a landlord might deny your application, ask for a higher deposit, or enforce stricter conditions.

According to Experian, the average credit score needed to rent an apartment is “669 for renters in high-priced buildings, compared with 626 in mid-range buildings and 597 for low-cost apartments.” These scores will differ depending on the state you’re in. The average score of renters in cities like San Francisco, Boston, and New York is over 700.

Average Credit Score Needed to Finance a Car

The average score you’ll need to finance a car is 665 for a used motor vehicle and 732 for a new one. With a higher score, you’ll qualify for a lower interest rate and monthly payment. According to Experian, these are the monthly amounts you can expect to pay for a vehicle based on your score:

Credit Score TierAverage Interest RateAverage Loan AmountAverage Monthly payment
Super prime (781–850)3.24%$33,690$541
Prime (661–780)4.21%$37,866$574
Nonprime (601–660)7.14%$36,912$591
Subprime(300–500)11.33%$32,284$579
Deep subprime (300–500)13.97%$28,991$562

Average Credit Score Needed to Get Approved for a Low-Interest Personal Loan

You never know when you’ll need additional funds to cover the unforeseen. Low scores may mean you can’t get a personal loan, or you’ll pay exorbitant interest should you take one. The average credit score needed to get approved for a low-interest personal loan is in the range of 670–739.

Average Credit Score Needed to Be Approved for a Great Rewards Credit Card

The higher your score, the more benefits and perks you’ll receive. The average credit score for a credit card with great rewards is in the region of 670–739.

Building Credit

When you borrow and pay back money, lenders can work out what type of borrower you are. This allows them to decide whether to offer you more credit.

It takes at least six months to build up a credit history and score and longer to achieve a score that persuades lenders you’re a low risk. If you’re just starting to build credit, here are some handy tips and tricks.

 

The Biggest Factors That Positively Affect Your Credit Score

Paying all your bills on time. Your payment history plays a major role in your credit score.
Not using too much of your available credit. Experian states, “owing less than 30 percent of your available credit is considered good, but it’s better not to carry a balance from month to month at all.”
A longer credit history and having older accounts. Long-standing financial records show how well you manage your credit.
Fewer recent applications for credit. Credit applications usually involve a hard inquiry, which can bring your credit score down by a few points.
Using different types of credit (e.g., a mortgage, a car loan, and cards). Lenders want to understand your borrowing habits across different forms of debt.

Two Steps You Can Take to Start Building Credit Quickly

Take out a secured credit card. These require a small deposit that you can get back if you keep up with your payments. Use the card to make a few inexpensive purchases and pay it off monthly.
PRO TIP: Choose a card that reports your payments to all three credit agencies.

Become an authorized user (i.e., a secondary account holder who enjoys the benefits but isn’t liable for payment) on the existing credit card of someone you trust (and who trusts you!).
PRO TIP: Make sure that the primary account holder has a healthy payment history and that the card is in good standing.

How Long It Takes to Start Building Credit with a Credit Card

It takes three to six months of using credit and settling the balance you owe to start building credit with a credit card.

How Long it Takes to Start Building Credit as an Authorized User

It can take 30–45 days to start building credit as an authorized user if the card issuer reports to the bureaus.

What Hurts Your Credit Score?

If you’re trying to boost your credit profile and raise your score, making small changes to your spending and repayment habits will help. We’ve compiled a list of things that can lower your score.

The Biggest Factors that Affect Your Credit Score Negatively

  • Missing even just one payment impacts your score significantly. Experian explains that “payment history accounts for 35% of your FICO Score, the credit score used by 90% of top lenders.”
  • Using too much of your available credit shows lenders that you’re too dependent on it.
  • Making too many new credit applications makes lenders believe you’re in a bad financial situation.
  • A short credit history results in a lower score. Your score will go up after you’ve been using the card responsibly for an extended period and have built up a solid payment history.
  • Negative items on your credit report, like repossession and bankruptcy, can affect your score for years.

How Long Negative Credit Report Entries Affect Your Score

Negative line items stay on your credit report for seven to ten years. Once these “derogatory marks” fall away, your credit scores start to go up and return to normal within three months to six years.

How Much Does Having Bad Credit Cost?

A bad credit score leads to:

  • Higher interest rates or down payments on mortgages
  • Excessive interest rates on credit cards
  • Unfavorable car loan terms, including higher interest and monthly payments
  • Increased insurance premiums
  • Limited renting options, as most landlords request specific credit scores to qualify for a rental

How Many People Have Debt in Collections on Their Credit Report?

Urban Wire reveals, “In 2019, 68 million people had debt in collections on their credit report and that “delinquent debt can result from unpaid bills, including medical bills, utility bills, parking tickets, and membership fees. When debt is more than 180 days past due, it enters collections and can be reported to credit bureaus.”

How Many People Have Late Payments on Their Credit Report?

In 2020, 1.4% of Americans had late payments on their credit report (30–180 days past due).

Disputes on Credit Reports

Your credit report, history, and score determine the amount of credit that lenders will offer you, the interest you pay, the size of your monthly repayments, and the type of purchases you can make. You should always be aware of what’s on your report since any incorrect information could have a significant impact on your life.

As a consumer, you have the right to credit repair—the ability to contest any incorrect or unfavorable items that appear on your credit report.

The Credit Repair Process

If you suspect there are mistakes on your credit report and you’d like to clean it up, start by requesting a copy of your report from one of the three bureaus using Annual Credit Report.com. If you spot any incorrect entries, file a dispute directly on the credit bureau’s website.

PRO TIP: You should lodge a dispute with all three credit agencies since they operate independently.

It takes a minimum of 30 days for a credit agency to investigate the dispute. If after that time your issue still isn’t resolved, file a complaint with the Consumer Financial Protection Bureau.
The Most Common Mistakes You Can Find on a Credit Report

Common credit report errors include:

  • Accounts you don’t recognize
  • Listed late payments that you think/know are incorrect
  • Listed missed payments that you think/know are incorrect
  • Debt that you don’t recognize reported to collections
  • Inaccurate personal information: wrong address, wrong name, misspelled name, etc.

Credit Repair Statistics

How Many People Have at Least One Error on Their Credit Report?

According to Consumer Reports, 34% of Americans have one or more errors on their credit report.

What Are the Most Removed Items from Credit Reports?

The items most often successfully removed from credit reports are collections, closely followed by late payments.
By How Many Points Do Credit Scores Improve After a Negative Mark Removal from a Credit Report?

Your credit score can improve by 100+ points after a negative mark, such as bankruptcy, is removed from your credit report.

What’s the Average Credit Score Gain for People Who Use Credit Repair Services?

“26% of credit repair clients see an average improvement of 100 to 140 points on their credit reports,” says Review 42. (A credit repair service is a third-party organization that charges you a fee for trying to get negative information taken off your credit report.)

How Much Do Most People End up Spending on Credit Repair Services?

Consumers generally spend between $250–500 a month on credit repair services, as indicated by Review 42.

 

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