A study of average credit scores for different racial groups shows substantial disparities, with Hispanics scoring on par with the national average, and the average score for Blacks falling below that level. Meanwhile, the White and Asian populations register scores higher than the average. This article looks at how the numbers break down.
- Credit scores do not factor in age, race, income, or place of residence.
- However, the financial factors that are used to calculate credit scores can disproportionately affect certain racial groups.
- Asian and White populations in the United States have the highest average credit scores. Hispanics roughly match the national average, and Black credit scores as a group are below average.
- The average score among all of the groups is considered Good to Very Good.
What the Credit Score Study Found
Based on FICO score data, the payment processing company Shift calculated that the median credit score across all Americans was 703 in 2019. That's within close range of the 701 average for Hispanic consumers. The Asian population enjoyed the highest credit scores, with an average of 745. That was slightly above the average for White Americans, which stood at 734 in 2019. Black Americans registered an average credit score of 677.
Despite these differences, the averages for all racial groups fell into the Good range, except for the Asian population's average, which would be classified as Very Good.
Credit scores measure a number of financial factors but do not take into account the person's age, race, salary, or where they live. Still, disparities can be driven by differences in take-home pay, how much other debt a consumer has, whether or not they've ever had a credit card, and if they are a homeowner with a mortgage.
For example, "Black and African American college graduates owe an average of $25,000 more in student loan debt than White college graduates," according to the Education Data Initiative. That debt burden can make it difficult to keep up with other payments, potentially resulting in a lower credit score.
Similarly, credit scoring models tend to favor homeownership, tracking payments on mortgages but generally not on rent or utilities. Since renters make up a higher percentage of Black and Hispanic households compared with White and Asian households, fewer Black and Hispanic consumers can benefit from mortgage-related inputs to their score, while a pristine rent payment record may have no impact.
In addition to race, the Shift study found that credit scores vary considerably among age groups, with younger consumers having lower scores, on average, and older consumers having higher ones.
|Average FICO Score by Race|
|Race||2019 Average Score||Classification|
Shift Credit Card Processing's report on credit scores drew from a number of sources, with its racial credit score data ultimately sourced from the Federal Reserve. The Fed regularly tracks and reports on U.S. consumer debt and credit metrics.
How Credit Scoring Works
Credit scores can be a little confusing. There are multiple different scoring models, along with three major credit reporting companies supplying the information that feeds into them. However, FICO is the most commonly used system, generating a score of 300 to 850.
The two biggest impacts on your credit score are:
- How regularly you pay your debts on time, which accounts for 35% of your score.
- How much of your available credit you've tapped, which accounts for 30% of it.
In other words, those two factors add up to almost two-thirds of your score.
Weighted less heavily but still important are how long you've had credit accounts (longer is better), how many times you've applied for new credit in the last 12 months (fewer is better), and whether or not you show a mix of credit types, such as a credit card, mortgage, and auto loan (variety is good).
The Equal Credit Opportunity Act makes it illegal for creditors to discriminate based on race, color, religion, age, and certain other characteristics. The Fair Housing Act offers similar protections for people seeking home financing.
What Is Considered 'Good' Credit?
Experian, one of the three major credit reporting companies, divides quality of credit into five tiers, beginning with Poor and culminating at Exceptional. Anything below 580 is considered Poor, and it takes a score of 670 to move into the Good range. A Fair score falls between the two. Very Good begins at 740, and those with a score of 800 or more enjoy the label of Exceptional.
How Can You Get Your Credit Score?
You can purchase your credit score from credit bureaus or credit scoring companies, or you can obtain one for free from a number of sources. For example, many banks and credit card issuers will provide free credit scores to their customers. There are also reputable websites that offer free credit scores. Investopedia publishes this list of Top Sources for Free Credit Scores. Bear in mind that there are multiple credit scoring models and you may have several credit scores besides the one you can obtain for free.
Why Are Credit Scores Important?
Lenders, such as credit card issuers or auto loan companies, use credit scores as a way to judge the creditworthiness of potential borrowers. Having a higher score increases the borrower's odds of being approved for a loan and of getting a good interest rate on it. Credit scores are also used by some employers, landlords, and insurance companies as a way of assessing applicants.
How Can You Raise Your Credit Score?
There are a variety of ways to raise your credit score and keep it up there. The most important one is to maintain a solid record of paying your bills on time. Another major factor is your credit utilization ratio, which compares the amount of debt you have outstanding at any given time with the total amount of credit you have available to you. If your credit utilization ratio exceeds 30%, your credit score can suffer.
The Bottom Line
Average credit scores in the U.S. differ by race, age, and other factors. At least part of that has to do with the factors that go into computing credit scores and how those factors are weighted, which tend to benefit some groups more than others.
Shift Credit Card Processing. "Credit Score Statistics."
Experian. "What Is a Good Credit Score?"
Education Data Initiative. "Student Loan Debt by Race."
U.S. Census Bureau. “Quarterly Residential Vacancies and Homeownership, Fourth Quarter 2022,” Page 9.
Federal Reserve System. "Consumer Credit - G.19."
myFICO. "What Is a Credit Score?"
myFICO. "What's in My FICO Scores?"
myFICO. “What Is New Credit?”
Consumer Financial Protection Bureau. "What Protections Do I Have Against Credit Discrimination?"
Experian. "What Is a Good Credit Utilization Rate?"
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