Credit scores now average 717 across the country. (iStock)
For the first time in a decade, average credit scores have decreased slightly to 717, according to data released by FICO. In 2023, average scores sat at 718.
This decline is likely due to high interest rates and inflation that are causing consumers to miss more payments and take on higher levels of debt. Since October, more than 18% of Americans have had past-due payments on one or more credit accounts. Compared to April 2023, this is up by 4%, FICO reported.
Missed payments on mortgages and auto loans have gone up but are still lower than they were before the pandemic. It’s missed payments on credit cards that have gone up most, and now exceed pre-pandemic levels.
"The apparent cumulative impact of higher interest rates, elevated consumer prices and economic uncertainty has put a financial strain especially on those consumers who heavily rely on credit cards to cover everyday expenses," FICO stated in its report. "This can lead to higher credit card utilization and subsequent defaults on credit card payments."
One way to get your credit score back up is to consolidate your debt and pay it down quicker. Credible can help you find the loan that’s right for you by showing you several reputable personal loan lenders that offer quick loans.
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Medical debt removed from credit histories helps raise scores for some
State governments are taking action to curb the effect medical debt has on credit scores.
Recently, Governor Katie Hobbs of Arizona announced that the state would begin working with a nonprofit, RIP Medical Debt, to forgive medical debt across the state. Over one million Arizonans will reap the benefits of this debt forgiveness.
"Hard-working, middle-class Arizonans should not be forced to have those difficult kitchen table conversations because of medical debt from conditions they cannot control," Hobbs said. "Arizonans deserve a break, and they deserve a government that fights for them, helping ensure that medical debt is not going to torpedo their lives."
About $30 million dollars in COVID relief funds is now being directed toward canceling the medical debt of certain Arizona residents. Those earning less than 400% at or below the federal poverty line or who owe more than 5% of their annual income will be eligible for forgiveness.
California is also seeking to help lessen the effects of medical debt. Attorney General, Rob Bonta stated his support for legislation proposed by state Senator Monique Limón that would bar medical debt from appearing on credit reports.
If the legislation goes through, California would be the third state to remove medical bills from credit reports. Colorado and New York did the same in 2023.
For those still dealing with medical debt, taking out a personal loan with a low interest rate can help you pay it off faster. Use an online marketplace like Credible to compare various rates and lenders to suit your needs.
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Ways Americans can boost their credit scores
For those worried about their credit scores, there are numerous steps consumers can take to make sure their scores stay in the good range. A few of those steps include:
- Stay under credit limits: Credit utilization affects 30% of a consumer’s credit score. Keeping credit balances low helps keep credit utilization low which leads to higher credit scores.
- Don’t close old credit card accounts: A consumer’s credit history takes into account all credit accounts and rewards consumers for long-held credit. Canceling credit cards erases that history, which can drop credit scores.
- Only apply for credit when needed: Opening credit accounts just to open them won’t do any good. Too many credit checks will lower a consumer’s credit, as it signals they don’t always use credit responsibly.
- Check credit reports at least once a year: Credit reporting agencies aren’t perfect, so there are instances where errors will appear on a consumer’s credit report. Everyone with a credit score should check their reports and review them for any inaccuracies.
Paying off high-interest debt is also a way to help your credit score. Visit Credible to consolidate your debt into a single, more manageable monthly payment.
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Have a finance-related question, but don't know who to ask? Email The Credible Money Expert at moneyexpert@credible.com and your question might be answered by Credible in our Money Expert column.
FAQs
For the first time in a decade, average credit scores have decreased slightly to 717, according to data released by FICO. In 2023, average scores sat at 718. This decline is likely due to high interest rates and inflation that are causing consumers to miss more payments and take on higher levels of debt.
Have credit scores decreased for the first time in a decade? ›
Credit scores have fallen for the first time in a decade as consumers struggle to make payments on time and save money, according to a recent report from FICO. "It's a notable milestone," FICO's vice president of scores and predictive analytics, Ethan Dornhelm, said, per CNBC.
Why did my credit score drop when I have no late payments? ›
Using more of your credit card balance than usual — even if you pay on time — can reduce your score until a new, lower balance is reported the following month. Closed accounts and lower credit limits can also result in lower scores even if your payment behavior has not changed.
Has the average credit score dropped for the first time since 2009? ›
The average credit score has ticked down for the first time in over a decade. The drop is just one point, from 718 to 717, but it's still a major indicator that Americans are struggling with debt.
Why is my credit score decreasing? ›
Credit scores can drop due to a variety of reasons, including late or missed payments, changes to your credit utilization rate, a change in your credit mix, closing older accounts (which may shorten your length of credit history overall), or applying for new credit accounts.
Why has my credit score gone down by 10? ›
Lenders and other service providers report arrears, missed, late or defaulted payments to the credit reference agencies, which may have a negative impact on your credit score. Making payments on time is an important way to show you can manage your finances responsibly.
When did credit scores start existing? ›
FICO score. The FICO score was first introduced in 1989 by FICO, then called Fair, Isaac, and Company. The FICO model is used by the vast majority of banks and credit grantors, and is based on consumer credit files of the three national credit bureaus: Experian, Equifax, and TransUnion.
What is the lowest credit score someone has ever had? ›
With the most popular credit-scoring models, the lowest credit score possible is 300, but some people may have no credit score due to limited or nonexistent credit histories.
Did credit scores not exist before 1989? ›
Companies began developing and using scores specific to certain credit industries, such as credit cards, in the mid-to-late 1900s, but there wasn't a universal score that was uniformly applied to all lending situations until 1989.
Does your credit score reset after 10 years? ›
Key takeaways. The time it takes debt and derogatory marks to fall off your credit report depends on the type of debt or mark it is. In general, most debt will fall off of your credit report after seven years, but some types of debt can stay for up to 10 years or even indefinitely.
Repeated credit searches
Simply applying for credit can have a negative effect on your score. If lenders see repeated attempts to secure financing over a short period of time, they may see this as a sign of desperation and decide against extending you credit.
Why is my credit score low when I have never missed a payment? ›
A short credit history gives less to base a judgment on about how you manage your credit, and can cause your credit score to be lower. A combination of these and other issues can add up to high credit risk and poor credit scores even when all of your payments have been on time.
Why did my credit score drop 40 points after paying off debt? ›
It's possible that you could see your credit scores drop after fulfilling your payment obligations on a loan or credit card debt. Paying off debt might lower your credit scores if removing the debt affects certain factors like your credit mix, the length of your credit history or your credit utilization ratio.
Why did my credit score drop 50 points when nothing changed? ›
Reasons why your credit score could have dropped include a missing or late payment, a recent application for new credit, running up a large credit card balance or closing a credit card.
Does your credit score change every 7 years? ›
Most negative items should automatically fall off your credit reports seven years from the date of your first missed payment, at which point your credit score may start rising. But if you are otherwise using credit responsibly, your score may rebound to its starting point within three months to six years.
Why did my average credit age decrease? ›
You closed your credit card. Closing a credit card account, especially your oldest one, hurts your credit score because it lowers the overall credit limit available to you (remember you want a high limit) and it brings down the overall average age of your accounts.
What is the average credit score in the US in 2024? ›
The average FICO credit score in the US is 717, according to the latest FICO data. The average VantageScore is 701 as of January 2024. Credit scores, which are like a grade for your borrowing history, fall in the range of 300 to 850.
