While the overall average FICO credit score in the U.S. hit a record high, a new study shows Mississippi has the lowest overall credit in the country.
Experian’s Consumer Credit Review, an annual report examining how Americans use credit, reveals the average Mississippi resident has a 675 credit score. Despite this being an eight-point increase from the previous year, Mississippi remains in a “fair” rating according to FICO’s scoring model.
So, what does this mean for the state? Let’s find out.
What Are the FICO Ratings?
FICO, short for the Fair Isaac Corporation, is the most popular scoring model used by big banks and small online direct lenders alike. Its system breaks down scores into the following five ratings:
- Excellent: 800–850
- Very Good: 740–799
- Good: 670–739
- Fair: 580–669
- Very Poor: 300–579
Each rating tells banks and online direct lenders something about your ability to repay loans. At the top of the totem pole, people with excellent ratings have a history of repaying what they owe on time. And at the opposite end of the spectrum, those in the very poor category have had trouble hitting due dates in the past.
Good behavior gets rewarded. Generally speaking, the higher your score is, the more trustworthy you look to financial institutions. The lower you slip down the ratings, the riskier you seem to lenders.
What Does a Fair Rating Mean?
Fair ratings fall within subprime credit. Even those on the high end of this scale, like the average Mississippi resident, have less than what many lenders like to see. You may find it hard to qualify for personal loans marketed towards people with very good or excellent ratings.
That doesn’t mean you can’t borrow. There are financial products designed for people with low scores, whether you call Mississippi home. But, for the sake of example, you may find online installment loans in Hattiesburg if you have a less-than-desirable score. The most accessible installment loans Hattiesburg MS has to offer are available even if you have a very poor rating.
It’s important to remember you still pose a greater risk to these lenders than those with excellent scores. As a result, even the top Mississippi installment loans have higher rates and fees.
That’s why most financial advisors will suggest you hold off borrowing until you can bolster your rating. It’s not always possible, but if you can manage to wait until you have a higher score, you’ll pay less to get an online installment loan.
How Do You Improve Your Rating?
A good rating relies on a simple equation:
Responsible Credit Use + Time = Improved Score
In practice, this means never missing a due date, keeping your line of credit and credit card utilization low, and limiting how often you open or close accounts.
If you’re coming from a fair or very poor rating, you’ll also have to wait until the negative entries to expire from your report. All entries in your file — whether good or bad — last just seven years. After that, they fall off your record, but during that time, you should be packing your file with good payment history utilization.
These habits will help improve your score.
