FICO: Average credit score reaches 700, an all-time high
Focusing on credit scores and what consumers can do to improve them
The average FICO score of U.S. consumers has reached 700 for the first time, according to a new report from FICO.
The credit score average has been steadily rising since October 2013, when it stood at 690. The average hit 700 in April 2017, according to the credit scoring company.
FICO Vice President of Analytics Ethan Dornhelm said that the percentage of consumers scoring in the lowest ranges continues to drop. Meanwhile, the percentage of consumers in the 800 and above range has steadily risen since 2010.
“I think a lot of the upward momentum has to do with the relatively strong and growing economy that we’ve experienced since the Great Recession,” Dornhelm said in an interview. “These sorts of factors have helped consumers improve their financial standing, and in turn their financial behaviors.”
Dornhelm said there is now a higher percentage of consumers scoring 800 and above than those scoring 600 or below – another milestone reached in April. He noted that many missed payments and serious delinquencies incurred by consumers during the Great Recession have fallen off their credit reports. Negative items generally stay on credit reports for seven years.
Consumers also have improved their paying habits and have generally held back from seeking too much new credit in recent years. FICO said 16.5 percent of the scorable population had delinquencies that were more than 90 days past due in April – down from 19.4 percent in October 2013. And 43.2 percent had more than one hard inquiry in April – a three-year low.
However, serious delinquencies on bank cards have ticked upward in the past year. The 90-day delinquency rate for bank cards reached 7.6 percent in April – up from 7.1 percent in April 2016, a number that had largely held steady for the previous two years.
“We’re going to be closely tracking whether that’s a modest blip – perhaps driven by lender efforts to grow their volumes and lend to consumers a little lower on the FICO score spectrum – or if it’s an indication of a significant shift in borrower repayment,” Dornhelm said.
Consumers’ credit scores are rising, but so are their card balances. Revolving credit reached $1.01 trillion in April, according to the Federal Reserve’s G.19 consumer credit report released in June. But consumers have consistently proved they can handle the swell in credit, and delinquencies remain near 15-year lows.
“Should more consumers show missed payments in their files, then we definitely will see a slowing, if not a reversal, in the average FICO score trend,” Dornhelm said. “But if consumers continue to improve their overall repayment behaviors, then we expect to see the trend continue as is.”
A high credit score can help a consumer get more favorable terms on credit cards and home loans. Experts say that while a score of 760 is needed to secure the lowest interest rates on a mortgage, a score of 700 or higher typically qualifies you for most credit cards.
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