Despite the pandemic, credit scores have hit a record high in the U.S. But a new study shows Texans are walking a thin line between good and bad credit.

According to HOPE Financial Wellness Index, the average Texan has a credit score of 673. This puts Texas in the top 10 states with the lowest scores in the country, 20 points below the national average.

The state’s average rests on the lower end of VantageScore’s “good” rating. But the nature of averages means plenty of people in the Lone Star State fall below 673.

What is VantageScore?

Financial institutions use VantageScore as a popular scoring model that analyzes and generates credit scores. Some of the biggest banks and online direct lenders in the country use VantageScores to determine the creditworthiness of a client.

The VantageScore model breaks consumer credit into five main ratings:

  1. Exceptional: 800–850
  2. Very Good: 740–800
  3. Good: 670–740
  4. Fair: 580–670
  5. Poor: 300–580

These ratings and coinciding scores reflect your ability to repay loans.

  • People with exceptional scores have a long history of repaying what they owe on time.
  • Those with poor scores have encountered trouble when repaying their loans.

What Does Fair or Poor Mean for Your Finances?

Texas’ average is on the low side of good. That means plenty of Texans will have scores that are much lower than that, falling into the fair and poor ratings.

If you have a score between 300 and 670, you might find it harder to qualify for personal loans at lower rates. Some financial institutions might even reject your application for a loan.

After several rejections, it might seem like you can only qualify for payday cash advances. But you might find an alternative, including installment loans in Texas that are available with fair credit.

The most accessible installment loans Texas has to offer may even be attainable if you have rock-bottom credit. While these online direct lenders will still check your credit, they compare it to other financial information before making a decision.

While you might still qualify for installment loans for bad credit, it’s important to note that your score will still influence the rates you pay. As a result, even the best Texas installment loans will cost more.

This is why many financial advisors recommend building up your credit before you borrow.

Realistically, that’s not always possible in an emergency. But keeping this goal in mind can help you qualify for more affordable options in the future.

How to Build Credit

To build credit, you have to demonstrate to VantageScore that you’re responsible with your finances. And the only way you can do that is by consistently paying your bills on time.

You should also keep the balances on your line of credit and credit cards low or at zero. This shows you don’t need to use credit often — and when you do, you can afford to pay it off.

Lastly, you’ll also have to wait for negative entries to expire, which can take up to seven years. Once they’re gone, all the good entries won’t be overshadowed, and you’ll see an even greater bump.

So, whether you need to borrow an installment loan or not, sit down with your budget. Figure out how you can pay bills and reduce debt. And most of all, be patient. Hard work eventually pays off.