US Credit Scores Hit Record Highs
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For the eighth consecutive year, US consumer credit scores are on the rise, topping out this spring at an all-time high, Fair Issac Corp., the creator of FICO credit scores, announced Monday. The average score is now 704, which is considered good.
FICO scores, which help determine whether you’ll qualify for a credit card or a loan (and at what interest rate), range from 300 to 850. The average score bottomed out at 686 during the housing crisis last decade, but has risen steadily as the economy has improved.
The new number is the highest average credit score since at least 2005, which is when Fair Isaac began tracking credit score data. The 704 score is considered “solidly good,” Ethan Dornhelm, vice president for scores and analytics at FICO, told CNBC. “Consumers will be qualifying for most credit that they are hoping to get.”
FICO lists scores of 670 to 739 as “good,” 740-799 as “very good” and 800 or better as “exceptional.”
The bump in the average FICO score is fueled at least in part by the decline in the number of delinquencies and the increase in the number of consumers with a credit score of 800 or more. The percentage of Americans with at least one account in collection on their credit file fell to 23% from 25.8% over the last year, Bloomberg reports. Because payment history is such a huge factor in setting your FICO score (it makes up 35% of your score), that reduction in collection accounts has pushed credit scores higher. What’s more, there are more consumers today with credit scores of 800 or more. Some 22% of all FICO scores were 800 or higher this spring, up form 20.6% a year ago, according to Bloomberg.
Consumers also have a better understanding of their credit scores and are checking them more frequently, Dornhelm told CNBC. Credit scores also increased earlier this year after the three major consumer credit bureaus — Experian, TransUnion and Equifax — began excluding tax liens from all credit reports. This move was expected to impact about 11% of consumers.
Featured image by cnythzl / Getty Images.
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