WASHINGTON (TND) — The U.S. average FICO credit score has improved from a year ago, according to a new report from FICO.
At the same time, consumer debt is higher than pre-pandemic levels. It’s a combination, even financial experts said, you would not expect.
“More than often, I use my credit card more than I actually do use cash,” said Kiara Age.
From grocery bills to gas prices, they are just some of the factors that have influenced Age’s decision to use her credit card more often.
FICO is a tool used by lenders and banks to determine your credit worthiness.
The U.S. average FICO Score as of April stands at 718, which is two points higher than the average score a year ago, according to FICO’s report which also notes a jump in consumer debt.
Bankrate Senior Industry Analyst Ted Rossman said he was surprised by the results.
“What I think this shows is the K-shaped economy. Basically, economic inequality,” Rossman said.
FICO found effects such as increasing interest rates and high consumer prices seem to be offset by slowing inflation, lower unemployment numbers, and the removal of certain medical collections data from consumer credit files.
As you review your credit, FICO notes that as your balances increase, the probability of difficulty meeting monthly payments on time also rises.
“Half of credit card holders more or less carry debt from month to month at an average interest rate over 20%, it’s hard to build wealth that way,” Rossman said.
Rossman said while delinquencies have gone up, they were artificially low during the pandemic.