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Race isn’t one of the factors that contributes to your credit score, and strict federal laws are in place to protect consumers from racial bias in the credit system.
Nevertheless, credit score statistics still show distinct differences in the average credit scores of various racial groups. Taking a closer look at these differences can clarify the underlying connections between race and credit scores and what they mean for all people in the US.
Credit score distribution by race
The table below shows the average credit score in different racial populations according to a survey conducted by the Federal Reserve on mortgage borrowers.
Percentage of consumers with poor credit by race/ethnicity
The Federal Reserve also provides data on what percentage of mortgage borrowers from each demographic group have credit scores that are below 620. Both FICO and VantageScore classify 620 as a “fair” credit score, although it’s approaching the “poor” range on their scales, and it’s low enough that it will interfere with your ability to get credit and loans.
The graphs above show that Asian and white borrowers on average have the highest credit scores. Black and Hispanic whites have the lowest average scores.
You may also be surprised to learn that average credit scores don’t only vary by race/ethnicity. Here are statistics showing how your credit score may be associated with other factors:
Does your race affect your credit score?
No, credit scoring models don’t consider your race when they calculate your credit score, and credit scores aren’t rigged against minority groups. Your credit score only reflects the choices you make when it comes to your credit accounts.
Credit scoring models are legally required to be race-neutral—the Equal Credit Opportunity Act of 1974 prohibits them from evaluating you based on your race or ethnicity (or any other protected status, such as religion or gender). 1
However, even though race isn’t directly involved in credit scoring, as the graphs above show, there are clear statistical trends in average credit scores by race. There’s also a strong link between your race and how likely you are to be approved for a new loan or credit card.
Percentage of People Denied Credit in Different Racial Groups
| Race/Ethnicity | Rejected | Rejected or Given Less than Requested |
|---|---|---|
| White | 19% | 24% |
| Black | 41% | 51% |
| Hispanic | 36% | 46% |
| Asian | 9% | 16% |
| Overall | 24% | 31% |
Data obtained from 2020 Federal Reserve statistics. 2
While getting denied for a credit card doesn’t hurt your credit directly, applying for new lines of credit does. The more anyone is forced to apply for credit cards, the more their scores will suffer.
Why do Black and Hispanic Americans have lower credit scores?
It’s not entirely clear what the reasons are for the differences in credit scores among different racial populations. The reasons are probably complex, but we’ve listed three of the biggest contributing factors below.
1. Credit invisibility
The Consumer Financial Protection Bureau found that Black and Hispanic people are more likely to be “credit invisible” or unscorable than white and Asian Americans are. 3
This doesn’t mean they have lower credit scores—instead, it means that they’re more likely to have no credit file at all. Credit invisibility is usually a consequence of an insufficient credit history, i.e., having very few (or no) credit accounts.
The higher percentage of credit invisible people in Black and Hispanic populations likely skews the statistics on average credit scores, since it means a large segment of the population can’t be surveyed. It also indicates that these groups have less access to credit.
2. Lower income levels
According to the Bureau of Labor Statistics, the weekly salary of Black Americans is around 20% below the national average. 4 This could partially explain why Black populations tend to have lower credit scores than other racial groups.
Although income doesn’t directly contribute to credit scores, it can contribute indirectly by making it more difficult to do the following things:
- Pay all your bills on time: If you’re stretched for cash, then you’re more likely to make a late payment or have a bill sent to collections, which is damaging to your credit.
- Qualify for the best loan offers: Lenders often consider your debt-to-income ratio when reviewing your loan application. If your income is lower relative to your financial obligations (such as your rental payments), they’ll see you as a riskier borrower and may charge you a higher interest rate. This, in turn, can make it harder to keep on top of your bills.
3. Limited access to credit resources
Because of racial inequality in the US, people of color often don’t have access to all the same legal, educational, and monetary resources that white people do. This lack of resources can make it more difficult to get access to credit-building tools and fight credit reporting errors.
Errors on your credit report can limit your loan options, and they’re fairly common, affecting at least 5% of the population. 5 Although everyone can (and should) dispute these errors, the credit dispute system is flawed, and legal action is often necessary to have them fixed.
What’s considered a good credit score?
There’s no universal definition of what counts as a good credit score. The average credit score in the US is 716, but what this number means varies between people and institutions. Lenders can set their own minimum credit score requirements, and these requirements can also differ among loan and credit card offers.
Moreover, FICO and VantageScore (the two major credit scoring companies) both have their own credit score classifications, which you can see in the tables below:
FICO Score Ranges
| Poor | Fair | Good | Very Good | Exceptional |
|---|---|---|---|---|
| 300 to 579 | 580 to 669 | 670 to 739 | 740 to 799 | 800 to 850 |
VantageScore Ranges
| Very Poor | Poor | Fair | Good | Excellent |
|---|---|---|---|---|
| 300 to 499 | 500 to 600 | 601 to 660 | 661 to 780 | 781 to 850 |
How to improve your credit score
Regardless of your race or ethnicity, if you’re struggling with poor credit, then you can take certain steps right now to improve your credit score:
- Check your credit reports for errors: Credit monitoring is important for everyone, and it’s a simple way to keep your credit in shape. If your credit reports contain any errors, send a dispute letter to the relevant credit bureau. You can access free copies of your credit reports once per year at AnnualCreditReport.com.
- Always make on-time payments: Your payment history is the most important factor contributing to your credit score, which means that consistently making on-time payments is the most effective way to improve your credit score. Consider setting up autopay or payment reminders to ensure you never miss a due date.
- Lower your credit utilization rate: Another way to give your credit score a boost is to reduce how much of your overall credit card limit you’re using (known as your credit utilization rate). You can do this by cutting back on your spending, requesting a credit limit increase for one of your cards, or opening a new credit card account.
- Keep your credit accounts open: Closing a credit card account will probably cause a drop in your credit score by reducing the total amount of available credit you have. Keeping your accounts open, on the other hand, will benefit your credit by demonstrating your ability to manage your debts over long periods of time.
