Personal Finance

Average FICO Score Reaches New High

Great news for all Americans: the average credit score is up once again. According to the Fair Isaacs Corporation (better known as FICO), the average as of April 2018 is a 704. While this may only be a slight step up from the milestone 700 reached last year, this does represent a new all-time high. It’s also a fairly significant climb from the low of 686 observed in 2009 — firmly in the throes of the financial crisis.

As you might expect, the average credit score was lower among younger adults and highest among older ones. However there was good cheer all around and each age group saw year-over-year increases. For example the average score of those aged 18 to 29 climbed from 654 to 659 while scores of those between 30 and 39 increased to 677 this year from 672 in 2017. Other age groups saw similar gains, but those over age 60 remained on top with average scores up five points to hit an impressive 747.

With the average score climbing, another positive sign is that the percentage of Americans with poor credit continues to decrease. Currently 19.1% of U.S. consumers have FICO scores below 600, down from 25.5% in 2010 and 20% last year. In contrast, 20.2% have scores between 750 and 799 while 21.8% boast scores over 800. Surprisingly, this means that more consumers have credit scores between 800 and 850 than any other 50 point score range.

There are several reasons why the average credit score has been and continues to be on the rise. For one, updates to credit reporting policies — including one that excludes all tax liens from credit reports — have recently taken effect and could have boosted scores for some consumers. That said, it’s more likely that education has had a major impact, with platforms like Credit Sesame, Credit Karma, and WalletHub growing in popularity.

Of course the recovery the economy has seen since 2009 and the falling unemployment rate are also certainly factors as Americans are less likely to default on debts or incur other negative credit marks. Oddly, at the same time, FICO notes that delinquency rates are actually increasing, with 8.2% of the population having been 90+ days past due on bankcards within the past two years. That’s an increase from the 8% observed in 2017 and more than a full point about the 7.1% seen from 2014 to 2016.

Aside from the delinquencies anomaly, there’s a lot to be excited about in this latest FICO report. Not only is the overall average at a record high but scores are also up across the board in terms of age groups, which implies that credit education is having a positive impact on younger generations, as well as older ones who may have had to learn some lessons themselves. Hopefully this is a trend that will carry on and there will be more record highs in our collective future.

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