- The average US credit score fell from 718 to 717 last year – the first drop since 2013
- In the wake of the pandemic, Americans have fallen further into debt
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US credit ratings are falling for the first time in more than a decade.
The national average credit score fell to 717 from a record 718 early last year, according to a new FICO report.
Over the past ten years, each time the average score has been reported, it has either increased or remained stable: it went from 690 in October 2013 to 718 last April.
But in the wake of the pandemic, Americans have found themselves increasingly in debt as rising prices, along with record-low interest rates, strained their budgets.
According to the report, the overall drop in creditworthiness was due to a combination of late payments and higher credit utilization.
The national average credit score fell to 717 from a record 718 early last year.
According to the credit rating company, anything below 629 is considered “poor,” while anything above 720 is “excellent.”
U.S. credit card debt hit a record $1.1 trillion in December, according to the New York Federal Reserve.
“Credit card and auto loan transitions into delinquency continue to rise above pre-pandemic levels,” said Wilbert van der Klaauw, economic research adviser at the New York Federal Reserve.
FICO is a company that produces scores that measure a person’s credit, or how likely they are to repay a loan on time.
If you don’t pay your credit card debt on time or miss a mortgage payment, the lender may report it to the rating agencies and your score will be lowered.
According to the credit rating company, anything below 629 is considered “poor,” while anything above 720 is “excellent.”
Overall, Americans’ credit scores have increased fairly steadily since about 2010, when the average score was 687. In October 2019 it was 796.
Then the pandemic caused a surge in ratings as federal aid helped Americans stay afloat and avoid defaulting on their loans.
Also contributing to those rising rates was the fact that information such as medical debt was erased from credit reports.
According to the New York Federal Reserve, the combined debt of American households increased by $212 billion to a record $17.5 trillion in the fourth quarter of 2023.
The central bank has indicated it could begin cutting interest rates later this year, but it is unclear exactly when. In the photo, the Chairman of the Federal Reserve, Jerome Powell.
But in the wake of the pandemic, consumers began to experience financial stress.
“The reopening of the economy, the reduction of government stimulus programs, and the return of payment accommodations to their pre-pandemic levels impacted consumer behavior,” the FICO report reads.
In October, average credit card utilization was 35 percent, up from 34 percent at the beginning of the year. Credit utilization is the percentage of their credit limit that a person is using.
The biggest increase was in the number of Americans who were more than 30 days late on a home loan payment: 3.9 percent versus 3.6 percent.
Late payments with bank cards also increased and are now slightly above their pre-pandemic levels: 11.2 percent were more than 30 days late in the last year.
Overall consumer debt has also surpassed pre-pandemic levels. According to the New York Federal Reserve, the combined debt of American households increased by $212 billion to a record $17.5 trillion in the fourth quarter of 2023.