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Key Takeaways
- The average credit score rose to a record high of 718 in April, up two points from last October, according to FICO.
- A good job market helped push the score up despite inflation and higher interest rates on credit cards and other consumer debt.
- Credit scores rose in 2020 and 2021 as people paid off credit card debt, but flattened out in 2022 as government pandemic cash relief ended.
Americans have never been in better shape when it comes to their ability to repay debt, at least according to one important measure.
The average credit score among U.S. consumers rose to 718 in April, up from 716 last October, FICO said Monday. That’s the highest average ever recorded by the financial data company, which assigns individuals credit scores based on information from the big three credit bureaus.
The scores are meant to give lenders an idea of how creditworthy a borrower is, so the national average serves as “a baseline metric of the nation’s credit health,” Can Arkali, FICO’s senior director of analytics, wrote in a blog post. The average U.S. credit score has been on an upward trend for nearly 10 years, and hasn’t fallen since 2013, and has remained firmly in the range considered a “good” credit risk by lenders (670-739.)
Among the reasons credit scores rose in early 2023: Workers have benefited from a solid job market, slowing inflation compared with last year, and new policies by the credit bureaus that wiped away medical debts under $500 from credit reports, Arkali wrote.
For consumers, that was enough to outweigh the financial pressure of persistent effects of high inflation over the past two years, and elevated interest rates on consumer loans due to the Federal Reserve’s campaign of anti-inflation rate hikes.
Still, FICO’s data added to recent signs of growing stress on household budgets, at least for some people. As of April, 17.3% of the population had at least one payment more than 30 days overdue at some point in the last year, versus 15.2% in April 2022. Average credit card balances bounced back, rising to $6,898 in April 2023 from $5,988 in April 2022, similar to the trend seen in recent data from the Consumer Financial Protection Bureau (CFPB).
Government pandemic relief cash aid allowed people to pay down their credit card balances and carry balances for shorter periods of time in 2021, according to a report last month by the Government Accountability Office (GAO) analyzing financial data on consumers from the Federal Reserve. That helped boost credit scores.
However, purchasing with plastic has made a comeback since the economy fully reopened, relief programs ended, and people continued to ramp up their spending on all kinds of goods and services.
