A New Record Has Been Set for the Average Credit Score.

ByLance T. Lee

Apr 21, 2022

American credit ratings continue to rise despite they don’t check current economic stress (and the desire to purchase online in lockdown). FICO began collecting credit scores in 2005, and the most recent data reveals that the average credit score has reached a record high of 716.

FICO, a company that uses credit report data to calculate credit scores, released its most recent figures on Tuesday. The FICO Score is the most often utilized by lenders to assess the risk of taking on a borrower, even though people generally have a variety of credit ratings. On this scale, there are three options: 300, 400, and 850.

Since 2005, when the average score was 686, FICO Scores have continuously increased, with a noticeable increase since 2014. In April 2017, the average score surpassed 700 points and had stayed above that barrier ever since. An eight-point increase in the 716 number from April 2020 was the beginning of the coronavirus outbreak.

Considering that the groups who are improving the most aren’t always those at the top, this pandemic bump may be particularly intriguing. In early 2020, for example, the sector with scores between 550 and 599 had a 20-point gain in the preceding year.

The group with scores between 750 and 799, on the other hand, has seen no change in aggregate.

Consumer debt levels have decreased, and credit-seeking activity has reduced, according to a blog post by FICO, which attributes the overall rise to “continuous improvements in key criteria examined by the score.” The stimulus payments and higher unemployment benefits, among other COVID-19 relief measures, were credited with keeping many Americans afloat financially. Lender-specific payment requirements, limited spending options, and free weekly credit reports all played a role.

The rising scores are part of a more significant effort to make a complicated procedure more flexible. Credit reporting modifications are being advocated by federal politicians at the same time as firms are reducing their dependence on credit scores, and states like Washington are temporarily restricting their use in establishing insurance premiums.

“Our present credit reporting system is flawed,” said Rep. Maxine Waters (D-Calif.) when she advocated a public credit-reporting agency in late June. To be specific, between April 2020 and April 2021, 17 percent of FICO scores dropped by at least 20 points;

To paraphrase her words, “good credit is a pathway to prosperity,” she stated. “Although our credit reporting system has stopped people of color and those with low income from accessing capital for small businesses, mortgage loans, and other forms of credit for far too long now… we should do something about this now. This isn’t a problem with someone’s character. This is a story about a system that has failed.”