Consumers are getting a better grade when it comes to how they use credit these days.
Nationally, credit scores are slowly and steadily starting to improve as more consumers who use credit are managing it more effectively. A recent report on FICO scores—the most widely used credit scoring system—found the national average score is currently at its highest level in nearly a decade.
It's an encouraging trend, since a credit score is one of the most important factors that lenders use to get a snapshot of risk as they decide what rates to offer on credit cards, private student loans, car loans, home insurance and mortgages. The higher the credit score, the better the rate for which consumers will qualify.
Your FICO score can range from 300 to 850. In April 2015, the average FICO score was 695 up from 688 in October 2005. According to Credit.org, a good credit score is above 680, but those with scores of 740 or higher are considered excellent. Those will allow you to quality for the best rates.
FICO scores are calculated from many different pieces of credit data grouped into five different categories: new credit, length of credit history, types of credit in use, and the most important: your payment history and the amounts you owe.
Late payments will lower your FICO score, but establishing or re-establishing a good track record of making payments on time can raise your score. So how can you improve your score?