Keeping Track of the National Average Credit Score

by Karen S Mueller, President of RepairCreditFacts.com

Financial markets want to know about information like national credit scores. This information determines the health of our economy. Financial markets trade on the changes and consistency of key indicators and factors, such as personal debt ratios and average credit scores.

Every nation has a standard credit score and a method for keeping track of it, reporting it, etc. The information indicates that country’s financial condition. For many years, the United States national average credit score was between 580 and 650. It has been on the rise.

In December 2007 the Experian National Score Index, displayed on www.NationalScoreIndex.com is 692. So, is 692 our national average credit score?

The Short Answer is "Close Enough"

The bottom line is yes. Because the value is close enough to the final calculations done with all the data.

Experian reports a value as a national score. They state:
"Experian National Score Index provides the most up-to-date look at U.S. consumers' credit and is a powerful indicator of the country's overall financial health. The Experian National Score Index monitors several components of consumer credit behavior to provide insight into consumer credit trends."

So Experian presents it's value for the national average credit score.

The other huge credit bureaus - Trans Union and Equifax - use their own databases of our individual credit records to calculate individual credit scores. They present a report of their statistics too. This muddies the water a bit.

Ultimately when all data is considered in mathematical ways of credit scoring, any one value is close in value to the others and thus, one is all that is needed to make a fair evaluation.

The credit score calculations are difficult to explain and much of it is actually kept a secret - really. We don't even know exactly what formula is used for calculating an individual's credit score.

However, we as consumers (and advisors) have been able to make a fairly accurate guess of the formula given the data on our credit report at the time.

Here's how it works:

Individual Credit Reports and Scores

When you apply for credit or someone reviews your credit, they are given one or more credit scores for you. It may or may not be an average of the credit scores from multiple credit bureaus.

Regardless, that credit score is then considered for your credit approval and for setting the interest rate you will pay for new credit. It can be considered "your credit worthiness" and their risk level for assuming your debt.

The information the lender or evaluator has access to is only a bit of the big credit file maintained on you within the credit bureaus' databases. They use a service that can access one or more of the credit union's databases. They obtain an individual's credit score after proof of identity. Usually that is the only information needed from the credit bureau to make a decision. Other factors are certainly taken into account for final approval of course.

When statistics are compiled for reporting averages, like national average credit scores, they are always performed on current financial data within each credit bureau's database.

These financial databases are updated continually with additions, changes, and deletions to individual's credit transactions/records. The basic data changes all the time, so compiled statistics change too.

Furthermore, there are averages reported by state and some state averages are much lower than others. Also the average is NOT the median. There are more very low scores pulling down the average.

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