Despite recent economic turmoil (and the temptation to endlessly shop online in lockdown), Americans' credit scores just keep climbing. Newly released data shows the average credit score is now a record 716 — the highest it's been since FICO started tracking scores in 2005.
FICO, a data analytics firm that generates scores from the information on people's credit reports, published its updated numbers Tuesday. Though consumers typically have a handful of different credit scores, the FICO Score is the most popular in the industry, used by an estimated 90% of lenders to evaluate how risky taking on a borrower will be. The scale goes from 300 to 850.
FICO Scores have been slowly trending upward since 2005, when the average score was 686, and increasingly more steadily since 2014. The average score crossed the 700-point mark in April 2017 and has remained above that threshold since then. The 716 number, which is technically for April 2021, represents an eight-point jump from April 2020, the early stages of the coronavirus crisis.
This pandemic boost may be especially interesting when you consider that the groups seeing major improvement aren't necessarily at the top. The segment that had scores between 550 and 599 in early 2020, for example, has enjoyed a 20-point increase over the past year.
In contrast, the segment with scores between 750 and 799 hasn't experienced any aggregate movement.
In a blog post, FICO attributed the overall increase to "continued improvements in key metrics considered by the score: fewer missed payments, lower consumer debt levels and reduced credit seeking behavior." It pointed out that COVID-19 relief initiatives like the stimulus checks and enhanced unemployment helped keep Americans financially afloat. Special payment policies from lenders, fewer opportunities to spend and access to free weekly credit reports were also likely contributing factors.
The surging scores come amid a larger movement aimed at making a notoriously tricky process more flexible. At the same time companies are decreasing their reliance on credit scores in lending decisions and states like Washington are temporarily banning their use in setting insurance rates, federal lawmakers are pushing for credit reporting changes.
To that end, Rep. Maxine Waters, D-Calif., proposed a public credit-reporting agency in late June, saying that "our current credit reporting system is broken." (Of note: 17% of FICO Scores went down by at least 20 points between April 2020 and April 2021.)
"Good credit is a gateway to wealth," she said in a statement. "Yet, for far too long, our credit reporting system has kept people of color and low-income persons from access to capital to start a small business; access to mortgage loans to become homeowners; and access to credit to meet financial emergencies ... This issue is not a matter of personal failings. This is about a failed system."