Average Credit Scores are Higher Than Ever – How’s Yours?

Credit score increase
Consumer credit scores are on the rise again!
Image via Unsplash

 

There’s good news from FICO (Fair Isaac and Corporation), the leading credit score algorithm creator. The average American credit score is again rising. Since the financial crisis abated, median scores have been constantly climbing and have reached a new milestone. FICO reported that the average score is now 704, up four points from their announcement last Summer of 700 as the average.

Credit scores hit record lows in 2009

In late 2009, at the height of the Great Recession, the average credit score hit bottom at 686. It had been in that range since 2005, but that was the worst moment for Americans' credit scores. Home foreclosures were at record highs, lots of people were jobless, and bankruptcies were common. It was a rough time for our economy and consumers.

Credit scores started climbing in 2013

Since October 2013, the US credit score average began rising and has been on a steady upward trend since then. In October 2013, it was at 690. Two years later, it was 695. Another two years and it hit 700. As of April 2018, the average American consumer credit score hit 704. Across the board all age groups are seeing higher credit scores, so that means it’s good for everyone.

Highest average credit scores by age group

Although the overall average is now 704, it’s differentiated broadly by age. The older the person, the higher the credit score, according to research by FICO. People age 60 and up average 747. In the 50-59 demographic, the average credit score is 713. For 40-49, it’s 690. Millennials aged 30-39 average about 677 and the youngest group, age 18-29 average a 659 FICO score.

Fewer people now have “bad” credit

The healthy job market and thriving US economy are pushing scores up and that means fewer Americans are now in the poor credit category. Those in the subprime credit range have been falling for years as the overall trend was on the rise. Around 19% of Americans have a credit score of less than 600. This is an excellent trend that continues today.

How to take advantage of this trend

Some recent changes are helping credit scores including the bureaus wiping out many public record complaints and de-ranking certain medical bills from the FICO calculation. These fixes helped, but it’s also about more than that. Americans are making smarter credit and financial choices. Some of the steps you can take to leverage this trend include:

  • Monitor your credit report – Errors are a big factor in credit scores. Check often to make sure there are no mistakes, payments are properly posted, and that your report is factually accurate.

  • Consider freezing your credit – Freezing your credit is now free and is something to consider. Freezing can prevent identity theft where people open accounts in your name and wreck your credit.

  • Pay your bills on time – Your payment history is the largest factor in your credit score. Make sure you always pay on time to prevent damage to your credit score. This is the foundation of good credit.

  • Don’t delete old accounts – Average age of open credit is another important factor. Needlessly closing old accounts can drop this average and your credit score.

  • Never max a credit card – Maxing out credit cards drops your score. Try not to over-utilize your credit lines and if you run up a card, pay it down ASAP and your score will bounce back.

  • Don’t open too many new accounts – Opening new accounts now and then can boost your credit and aids utilization by adding credit lines. Do it too much, though, and it can ding your score.

There’s never been a better time to boost your credit score. Take advantage of this trend and get to work on your credit report. To see more tips and strategies for improving your credit score, check out our Credit Score Keys DVD.

 

 

Source: FICO report

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