- The average US credit rating fell from 718 to 717 last year – the first drop since 2013
- In the wake of the pandemic, Americans have fallen deeper into debt
U.S. credit scores are falling for the first time in more than a decade.
The national average credit score fell from a record high of 718 early last year to 717, according to a new report from FICO.
Over the past decade, the average score has increased or remained stable each time it has been reported: from 690 in October 2013 to 718 in April last year.
But in the wake of the pandemic, Americans have fallen deeper into debt as rising prices combined with record high interest rates put pressure on their budgets.
The overall decline in creditworthiness was caused by a combination of missed payments and higher credit utilization, according to the report.
The national average credit score fell to 717 from a record high of 718 early last year
According to the credit scoring company, anything below 629 is considered ‘poor’, while anything above 720 is ‘excellent’
U.S. credit card debt reached a record high of $1.1 trillion in December, according to the New York Federal Reserve.
“The transition of credit card and auto loans into delinquency is still rising above pre-pandemic levels,” said Wilbert van der Klaauw, economic research adviser at the New York Fed.
FICO is a company that produces scores that measure a person’s creditworthiness – or how likely they are to pay back a loan on time.
If you don’t pay off your credit card debt on time or miss a mortgage payment, the lender may report it to rating agencies and your rating will be downgraded.
According to the credit scoring company, anything below 629 is considered “poor,” while anything above 720 is “excellent.”
Overall, Americans’ credit scores have risen fairly steadily since about 2010, when the average rating was 687. In October 2019 this was 796.
Then the pandemic sent ratings soaring as federal aid helped Americans stay afloat and avoid defaulting on their loans.
Also contributing to these rising interest rates was information such as medical debt being erased from credit reports.
According to the New York Fed, combined U.S. household debt rose by $212 billion to a record $17.5 trillion in the fourth quarter of 2023.
The central bank has indicated that it may start cutting interest rates later this year, but it is not clear exactly when. The photo shows Fed Chairman Jerome Powell
But in the wake of the pandemic, consumers began to experience financial strain.
“The reopening of the economy, the phasing out of government stimulus programs and the return of payment facilities to pre-pandemic levels impacted consumer behavior,” the FICO report said.
In October, the average credit card usage was 35 percent, compared to 34 percent earlier this year. Credit utilization is the percentage of the credit limit that someone uses.
The largest increase occurred in the number of Americans who were more than 30 days delinquent on a real estate loan: 3.9 percent compared to 3.6 percent.
The number of missed bank card payments has also risen and now slightly exceeds pre-pandemic levels: 11.2 percent were more than 30 days past due in the past year.
Total consumer debt has also exceeded pre-pandemic levels. According to the New York Fed, combined U.S. household debt rose by $212 billion to a record $17.5 trillion in the fourth quarter of 2023.