Credit scores now average 717 across the country. (iStock)
For the first time in a decade, average credit scores have decreased slightly to 717, according to data released by FICO. In 2023, average scores sat at 718.
This decline is likely due to high interest rates and inflation that are causing consumers to miss more payments and take on higher levels of debt. Since October, more than 18% of Americans have had past-due payments on one or more credit accounts. Compared to April 2023, this is up by 4%, FICO reported.
Missed payments on mortgages and auto loans have gone up but are still lower than they were before the pandemic. It’s missed payments on credit cards that have gone up most, and now exceed pre-pandemic levels.
"The apparent cumulative impact of higher interest rates, elevated consumer prices and economic uncertainty has put a financial strain especially on those consumers who heavily rely on credit cards to cover everyday expenses," FICO stated in its report. "This can lead to higher credit card utilization and subsequent defaults on credit card payments."
One way to get your credit score back up is to consolidate your debt and pay it down quicker. Credible can help you find the loan that’s right for you by showing you several reputable personal loan lenders that offer quick loans.
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Medical debt removed from credit histories helps raise scores for some
State governments are taking action to curb the effect medical debt has on credit scores.
Recently, Governor Katie Hobbs of Arizona announced that the state would begin working with a nonprofit, RIP Medical Debt, to forgive medical debt across the state. Over one million Arizonans will reap the benefits of this debt forgiveness.
"Hard-working, middle-class Arizonans should not be forced to have those difficult kitchen table conversations because of medical debt from conditions they cannot control," Hobbs said. "Arizonans deserve a break, and they deserve a government that fights for them, helping ensure that medical debt is not going to torpedo their lives."
About $30 million dollars in COVID relief funds is now being directed toward canceling the medical debt of certain Arizona residents. Those earning less than 400% at or below the federal poverty line or who owe more than 5% of their annual income will be eligible for forgiveness.
California is also seeking to help lessen the effects of medical debt. Attorney General, Rob Bonta stated his support for legislation proposed by state Senator Monique Limón that would bar medical debt from appearing on credit reports.
If the legislation goes through, California would be the third state to remove medical bills from credit reports. Colorado and New York did the same in 2023.
For those still dealing with medical debt, taking out a personal loan with a low interest rate can help you pay it off faster. Use an online marketplace like Credible to compare various rates and lenders to suit your needs.
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Ways Americans can boost their credit scores
For those worried about their credit scores, there are numerous steps consumers can take to make sure their scores stay in the good range. A few of those steps include:
- Stay under credit limits: Credit utilization affects 30% of a consumer’s credit score. Keeping credit balances low helps keep credit utilization low which leads to higher credit scores.
- Don’t close old credit card accounts: A consumer’s credit history takes into account all credit accounts and rewards consumers for long-held credit. Canceling credit cards erases that history, which can drop credit scores.
- Only apply for credit when needed: Opening credit accounts just to open them won’t do any good. Too many credit checks will lower a consumer’s credit, as it signals they don’t always use credit responsibly.
- Check credit reports at least once a year: Credit reporting agencies aren’t perfect, so there are instances where errors will appear on a consumer’s credit report. Everyone with a credit score should check their reports and review them for any inaccuracies.
Paying off high-interest debt is also a way to help your credit score. Visit Credible to consolidate your debt into a single, more manageable monthly payment.
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Have a finance-related question, but don't know who to ask? Email The Credible Money Expert at moneyexpert@credible.com and your question might be answered by Credible in our Money Expert column.
FAQs
For the first time in a decade, average credit scores have decreased slightly to 717, according to data released by FICO. In 2023, average scores sat at 718. This decline is likely due to high interest rates and inflation that are causing consumers to miss more payments and take on higher levels of debt.
Why did my credit score go down if I didn t miss any payments? ›
Using more of your credit card balance than usual — even if you pay on time — can reduce your score until a new, lower balance is reported the following month. Closed accounts and lower credit limits can also result in lower scores even if your payment behavior has not changed.
Why did my credit score drop when my loan balance decreased? ›
It's possible that you could see your credit scores drop after fulfilling your payment obligations on a loan or credit card debt. Paying off debt might lower your credit scores if removing the debt affects certain factors like your credit mix, the length of your credit history or your credit utilization ratio.
Why is my credit score low when I have never missed a payment? ›
A short credit history gives less to base a judgment on about how you manage your credit, and can cause your credit score to be lower. A combination of these and other issues can add up to high credit risk and poor credit scores even when all of your payments have been on time.
Which of the following missed bills can cause your credit score to go down? ›
You missed a credit card payment
Because your payment history is the most important factor that determines your credit score (making up 35% of your FICO score calculation), missing a credit card payment will have an immediate negative effect on your score.
Why did my credit score drop 60 points for no reason? ›
Credit scores can drop due to a variety of reasons, including late or missed payments, changes to your credit utilization rate, a change in your credit mix, closing older accounts (which may shorten your length of credit history overall), or applying for new credit accounts.
Why did my credit score drop 20 points for no reason? ›
The most likely reasons are: your balances increased, you recently closed accounts, you applied for new lines of credit, or there is inaccurate or fraudulent information on your account. If your credit score dropped by 40 points, this is likely due to late payments that continue to compound on past-due bills.
Why did my credit score suddenly drop huge? ›
Lenders and other service providers report arrears, missed, late or defaulted payments to the credit reference agencies, which may have a negative impact on your credit score. Making payments on time is an important way to show you can manage your finances responsibly.
How to ask for late payment forgiveness? ›
Ask the lender to remove it with a goodwill letter
In some cases, creditors are willing to make a goodwill adjustment if your payment history has been good or if you have a good relationship with them. The process is easy: simply write a letter to your creditor explaining why you paid late.
How long does it take to rebuild credit after paying off debt? ›
It can take weeks or even days for you to notice a change in your credit score. If you have recently paid off a debt, wait for at least 30 to 45 days to see your credit score go up. Will it be beneficial for my credit score if I pay off a debt? Your payment history will not be removed after you pay off a debt.
you have a high credit utilization ratio
you might have paid your bills on time, but you also need to check the balance you carry on each credit card. if you have a high credit utilization ratio, it can cause a drop in your credit score. you should check your credit limit usage on both an overall and per-card basis.
Why did my credit score go from 524 to 0? ›
Reasons why your credit score could have dropped include a missing or late payment, a recent application for new credit, running up a large credit card balance or closing a credit card.
Is a 900 credit score possible? ›
Highlights: While older models of credit scores used to go as high as 900, you can no longer achieve a 900 credit score. The highest score you can receive today is 850. Anything above 800 is considered an excellent credit score.
Is it true that after 7 years your credit is clear? ›
Highlights: Most negative information generally stays on credit reports for 7 years. Bankruptcy stays on your Equifax credit report for 7 to 10 years, depending on the bankruptcy type. Closed accounts paid as agreed stay on your Equifax credit report for up to 10 years.
How many missed payments before bad credit? ›
Highlights: Even a single late or missed payment may impact credit reports and credit scores. Late payments generally won't end up on your credit reports for at least 30 days after you miss the payment. Late fees may quickly be applied after the payment due date.
How to raise your credit score 200 points in 30 days? ›
How to Raise Your Credit Score by 200 Points
- Get More Credit Accounts.
- Pay Down High Credit Card Balances.
- Always Make On-Time Payments.
- Keep the Accounts that You Already Have.
- Dispute Incorrect Items on Your Credit Report.
Lenders like to see a mix of both installment loans and revolving credit on your credit portfolio. So if you pay off a car loan and don't have any other installment loans, you might actually see that your credit score dropped because you now have only revolving debt.
Why did my credit score drop by 100 points? ›
For your credit score to drop 100 points at once, you're most likely talking about being 90 days late or more on a loan or credit card payment you're on the hook for. Believe it or not, a single late payment could cause damage in that ballpark, especially if your credit score is higher to begin with.
What if my credit score drops before closing? ›
If your credit score drops before your loan is finalized, you could end up with a higher borrowing rate or even lose your new mortgage altogether.
Can I find out why my credit score dropped? ›
Things that can contribute to a credit score drop include late payments, a high credit utilization ratio and derogatory marks on a credit report. Checking your credit reports regularly can help you monitor the effects of your credit use on your scores.
