The average FICO score is on the rise. Take a look at the numbers and find out what’s driving the increase.
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The average FICO score for U.S. consumers is now 706, according to new data from the credit scoring firm.
It’s a significant jump from the average low of 686 in October 2009. But consumers scores have been increasing since 2009, thanks in part to a healthy economy that has featured steady growth since the Great Recession.
In a Sept. 10 blog post, FICO vice president of scores Ethan Dornhelm said key drivers of the trend include greater consumer awareness regarding FICO scores and negative credit data being removed from consumers’ files. Credit missteps such as missed payments that occurred during the Great Recession have largely fallen off consumers’ credit reports, he noted.
Meanwhile, the three major credit bureaus – Equifax, Experian and TransUnion – have in recent years removed negative items such as civil judgments and tax liens from consumers’ credit reports under new reporting standards.
And Fed data show consumers in lower-scoring ranges may have also benefited from the removal of many collection items from credit reports under the new rules.
Percentage of lower score consumers has dropped, higher score consumers has risen
The percentage of U.S. consumers with the lowest score range (below 550) has dropped from 16 percent in April 2009 to 11.1 percent in April 2019 — almost a third.
And the percentage of super-prime range consumers (800-plus) has increased from 18.2 percent to 22.3 percent during the same period.
Additionally, FICO data show credit card account delinquencies of 90 days or more have fallen by 62 percent, credit card utilization is down by 28 percent, credit histories are 9 percent longer and credit-seeking activity has decreased by 14 percent.
FICO scores’ continued upward trend hinges on economic uncertainty
Dornhelm suggested new economic uncertainties could affect the long-term upward trend in FICO scores.
“Recent origination vintages have started to display modest increases in defaults,” he said. “Trade talks with China, the possibility of a no-deal Brexit and Fed interest rate decisions loom large as concerns of a recession persist.”
Dornhelm also referenced a February FICO report that showed a downward shift in the relationship between a consumer’s FICO score and the likelihood he or she will repay card balances as agreed.
“While the average FICO score and the relationship between the FICO score and repayment odds continues to shift, prudent lenders and investors who leverage the full breadth of information available to them as they assess borrower credit risk are well positioned to navigate the road ahead,” Dornhelm said.
Rising FICO scores open doors for consumers
The FICO score increase is good news for consumers, and it makes sense given the 10-year economic expansion, said Ted Rossman, industry analyst for CreditCards.com.
In general, you need a FICO score of at least 670 to get favorable rewards and credit card terms, so most people are able to qualify nowadays, he added.
The absolute best terms go to those with scores of 740-plus, Rossman pointed out, so that’s an important number to keep in mind.
If your credit score isn’t where you want it to be, consider applying for a secured card, a card that’s easier to get — like a student card, Apple Card or the Petal Visa® Credit Card — a credit-builder loan or getting on a responsible person’s card as an authorized user.
Also, consider alternative credit scoring systems such as Experian Boost and UltraFICO, which can’t hurt your score, but can help it.
“Early reports are that many people are being aided by these services, which look at your bank accounts (with permission) for additional information that doesn’t typically count toward a credit score,” Rossman said.