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Having a good credit score can mean lower interest rates and more options for financial products and services. As per the latest NerdWallet survey, approximately 79% of Americans say they are currently attempting to improve their credit right now.
The survey of more than 2,000 U. S. Adults were questioned online by The Harris Poll regarding the value of having a high credit score and any obstacles that may be preventing them from raising their score. We also asked Americans how they’ve been negatively impacted by their credit score in the past.
In today’s world, a good credit score is often seen as a gateway to financial success It can unlock lower interest rates on loans, better insurance premiums, and even access to certain jobs and apartments. But what about those who don’t have a “perfect” credit score? How many Americans are struggling with less than stellar credit, and what can they do to improve their situation?
The State of Credit in America:
According to a recent study by NerdWallet, a whopping 80% of Americans are actively trying to improve their credit score. This suggests that a significant portion of the population is aware of the importance of good credit and is taking steps to boost their own scores. However, the same study also found that 43% of Americans have been negatively impacted by their credit score in the past. This means that bad credit can have real-world consequences, affecting everything from employment opportunities to insurance costs.
How Many Americans Have Bad Credit?
Defining “bad credit” can be tricky as there are different credit scoring models and different thresholds for what constitutes a good, bad, or fair score. However according to a 2021 report by Experian, around 33% of Americans have a FICO credit score below 620, which is generally considered to be “bad” credit. This means that millions of Americans are facing the challenges associated with having a less than perfect credit score.
Why Do Americans Have Bad Credit?
There are many reasons why someone might have bad credit. Some common factors include:
- Missed or late payments: This is one of the biggest factors that can negatively impact your credit score. Even a single late payment can stay on your credit report for up to seven years, dragging down your score.
- High credit utilization: This refers to the amount of credit you are using compared to your total available credit. Ideally, you should keep your credit utilization below 30%. Using more than that can hurt your credit score.
- Debt collection accounts: If you have unpaid debts that have been sent to collections, this will also negatively impact your credit score.
- Limited credit history: If you have a short credit history, or if you haven’t used credit much, your credit score may be lower than someone with a longer and more established credit history.
The Impact of Bad Credit:
Having bad credit can have a significant impact on your life. It can make it difficult to get approved for loans, mortgages, and even jobs. You may also have to pay higher interest rates on loans and insurance premiums. In some cases, bad credit can even prevent you from renting an apartment or getting a cell phone plan.
Improving Your Credit Score:
The good news is that you can raise your credit score gradually. Here are a few tips:
- Make all of your payments on time: This is the single most important thing you can do to improve your credit score. Set up reminders or use automatic payments to ensure you never miss a due date.
- Keep your credit utilization low: Aim to use less than 30% of your available credit. If you have a high credit utilization, try to pay down your balances as quickly as possible.
- Dispute any errors on your credit report: It’s important to review your credit report regularly and dispute any errors you find. You can get a free copy of your credit report from each of the three major credit bureaus (Experian, Equifax, and TransUnion) once a year at AnnualCreditReport.com.
- Become an authorized user on a credit card with good credit: This can help you build your credit history without having to open a new account yourself.
- Consider a secured credit card: This is a type of credit card that requires a security deposit, which can help you rebuild your credit if you have bad credit or no credit history.
Having less than perfect credit can be a challenge, but it’s not insurmountable. By understanding the factors that impact your credit score and taking steps to improve it, you can put yourself in a better financial position and open up new opportunities for yourself. Remember, it takes time to build good credit, so be patient and persistent in your efforts. With dedication and a little bit of effort, you can achieve your financial goals and enjoy the benefits of having a good credit score.
Most care about their credit scores; many hurt by credit before
According to the survey, the majority of Americans (95%) believe that having a good credit score is important to them. (Survey respondents weren’t given a particular range to define a “good” credit score. Although there are various credit score models in use, a good credit score is typically between 690 and 719 on the widely used 300–850 scale.
For the 5% of Americans who say having a good credit score isn’t important to them, the No. The first justification they give is that they don’t require a high credit score because they don’t intend to take out any loans or debt (45%), according to the survey.
The reason why nearly 25% of Americans believe that having a good credit score is not important to them is because they believe that credit scores are a scam. Credit scores are widely used, so regardless of your opinion about the validity of the system, it’s probably a good idea to make sure yours is in good standing.
Here’s why, in percentage terms: based on our survey, more than 2% of Americans (43%) say that their credit score has negatively impacted them in the past. This impact is limited to debt products; 10% of Americans in 2010 reported having higher auto insurance costs, and 8% reported having to make a deposit to pay for their utilities because of their credit score.
Approximately 12% of Americans, or around 1% of the population, are Gen Zers (ages 2018 to 26). Of these, 0% of them are uncertain whether their credit score has ever negatively impacted them. For the youngest adults, it’s likely that they haven’t yet needed to use their credit score for any purposes, or that when they needed to demonstrate their good credit, a family member was able to co-sign.
Key findings
- Some have been burned by credit scores. More than 43% of Americans say their credit score has negatively impacted them in the past; 221 percent of Americans say they have been turned down for a credit card and that they have paid a higher interest rate on debt because of their credit score, according to the survey.
- Many are concerned about hurting their credit. More than fifty percent of Americans (58%) worry that they will lose their credit score in the upcoming months. Approximately 39% of Americans worry that they will damage their credit score by failing to make a payment, while 228 % worry that they will damage their credit score by taking on excessive debt, according to the survey.
- Barriers are keeping half of U. S. adults from improving their credit. The majority of Americans (50%) say they face obstacles in their quest to improve their credit right now. Approximately 15% of Americans (or 1 in 7) cite having a low credit limit as one of these obstacles, per the survey.
“Your credit score can really open or close a lot of doors,” says Sara Rathner, NerdWallet’s credit cards expert and spokesperson. It’s important to take note of these if you intend to apply for a loan or credit card in the upcoming months in order to increase your chances of being approved. ”.