Despite the recent economic turmoil (and the temptation to endlessly shop online during lockdown), Americans’ credit scores keep climbing. Newly Released Data shows the average credit score is now a record 716 – the highest since FICO started tracking scores in 2005.
FICO, a data analytics firm that generates scores from information on people’s credit reports, released its updated numbers on Tuesday. Although consumers typically have a handful of different credit scores, the FICO score is the most popular in the industry, used by approximately 90% of lenders to assess a borrower’s borrowing risk. The scale goes from 300 to 850.
FICO scores have slowly increased since 2005, when the average score was 686, and more and more steadily since 2014. The average score crossed the 700-point mark in April 2017 and has remained above that threshold ever since. . The number 716, which technically corresponds to April 2021, represents an eight point jump from April 2020, the early stages of the coronavirus crisis.
This pandemic boost can be particularly interesting when you consider that the groups that experience major improvement are not necessarily at the top. The segment that had scores between 550 and 599 at the start of 2020, for example, has seen a 20-point increase over the past year.
In contrast, the segment with scores between 750 and 799 saw no overall movement.
In a blog post, FICO attributed the overall increase to “continued improvement in key metrics captured by the score: fewer missed payments, lower consumer debt levels, and credit-seeking behavior.” reduced”. He pointed out that COVID-19 relief initiatives such as stimulus checks and rising unemployment have helped keep Americans financially afloat. Lenders’ special payment policies, reduced spending opportunities, and access to free weekly credit reports were also likely contributing factors.
The rising scores come amid a broader move to make a notoriously tricky process more flexible. At the same time, companies are reduce their dependence on credit scores in lending decisions and states like Washington are temporarily ban their use in setting insurance rates, federal legislators are to push for credit report changes.
To that end, Rep. Maxine Waters, D-Calif., proposed a public credit reporting agency in late June, saying “our current credit reporting system is broken.” (Note: 17% of FICO scores decreased by at least 20 points between April 2020 and April 2021.)
“Good credit is a gateway to wealth,” she said in a declaration. “Yet for too long our credit reporting system has prevented people of color and low-income people from accessing capital to start a small business, accessing mortgages to become homeowners and to have access to credit to deal with financial emergencies. . This problem is not about personal failures. It is about a broken system.”
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