The average FICO credit score hit a new high this past July. For the first time, the average FICO Score reached 711 — up from 708 in April and 706 a year prior, according to Fair Isaac Corporation, the data analytics company behind the score.
The report of a steady increase in consumers' credit scores comes at an interesting time as millions of Americans were struggling to pay their bills amid the economic fallout from the coronavirus pandemic this summer. It is likely that the government's financial assistance, including stimulus checks and enhanced unemployment benefits, played a big factor in helping consumers stay afloat.
Lenders' forbearance and deferment programs on mortgages, student loans and car payments also freed up borrowers to pay their bills and make a dent in their credit card debt debt. In fact, the Federal Reserve Bank of New York released a report in early August that found a historic drop in credit card debt recorded in the second quarter of this year.
Decreasing your credit card balances is just one way to boost your credit score. If your credit score is lower than the average 711, there are a few things you should focus on in order to improve yours.
Below, CNBC Select breaks down the top factors to consider when you want to increase your credit score and how to keep track of your progress.
When it comes to your 3-digit credit score, certain actions influence that number more than others. Credit active consumers should be aware of what the FICO credit scoring model looks at when calculating their scores.
Here are the five key factors and how much weight they each have.
Begin by making an effort to pay your bills on time every month. This is the most important action you can take to start improving your credit. If you have trouble remembering the different due dates, set up automatic payment so the money comes out of your account on the same day every month and you don't make the costly mistake of paying late.
With credit card bills, it's especially crucial that you pay them in full so you don't carry a revolving balance month to month and accrue high interest charges. As your balance increases, you also eat away at your credit limit. How much available credit you use, or your "amounts owed," is reflected in your credit utilization rate. The goal is to maintain a utilization rate below 10%. The higher your utilization, the worse for your credit score. Keeping low balances and high credit limits helps for a low utilization.
As you work on improving your credit score, just as important is tracking your progress. While you can check your credit score for free a variety of different ways, signing up for a credit monitoring service that does the tracking for you and alerts you of any changes can be exceptionally helpful.
If you don't mind paying a monthly fee, FICO® Advanced is the best for the most accurate credit score reading. Used in over 90% of U.S. lending decisions, the FICO Score is the most widely used scoring model.
All three plans offered (Basic, Advanced and Premier) grant you access to 28 versions of your FICO Score, including scores for credit cards, mortgages and auto loans. Plus, you'll receive $1 million identity theft insurance and 24/7 access to U.S.-based identity theft experts who can help restore your identity if your information is compromised.
$19.95 to $39.95 per month
Experian for Basic plan or Experian, Equifax and TransUnion for Advanced and Premier plans
Yes, for Advanced and Premier plans
Yes, up to $1 million
If you don't want to fork over a fee for credit monitoring, there are other solid services available at no cost. CreditWise® from Capital One and Experian free credit monitoring are two that ranked on CNBC Select's list of the best credit monitoring services. CreditWise uses the VantageScore credit scoring model, while Experian uses the FICO model.
TransUnion and Experian
Yes, one-time only
Don't miss: Where to get your FICO Score for free