The national average FICO credit score has decreased for the first time in a decade – what this means

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The economic landscape of the United States is experiencing a significant shift, marked by a new event: the average FICO credit score has dropped for the first time in a decade. 

In a recently released report on credit score data from October 2023, major credit reporting company, FICO, says that the national average credit score has decreased for the first time in a decade from 718 to 717. 

Why did credit scores drop?

The decrease in average credit scores may be attributed to several key factors:

• Increased Missed Payments: There has been an increase in missed borrower payments, showing serious financial strain among consumers. The FICO report shows that, as of October 2023, more than 18% of the population was late on payments.
• Rising Consumer Debt Levels: Consumer debt, particularly credit card debt, has risen to over 1 trillion. This indicates that more consumers may be leaning on credit cards to cover everyday expenses.
• Slowing New Credit Activity: New credit activity – consumers applying for new lines of credit – has slowed down.

What this means for you

It’s hard to say what this will mean moving forward, but at this moment it’s too soon to say – or worry too much. In a statement given to Bloomberg, Ethan Dornhelm, VP at FICO, said that “This isn’t a blinking red light, but it certainly is a yellow light.”

Whatever happens in the future, it’s important to take steps to try to protect your credit. Here are some strategies:

Reduce Credit Utilization Rates: Your credit utilization ratio is the amount of available credit you have compared to the amount of credit you’ve used. Generally, the best practice is to keep your credit utilization ratio below 30%, if you can.

Consolidate Debt: If you’re worried about tracking different payments, consider consolidating your debt into one payment to avoid the risk of missing a payment. A missed payment is a negative mark on your credit, and can stay on your credit reports for 7 years.

Protect Your Credit History: Length of credit history is a significant factor in how your credit score is calculated. Closing a credit card that you’ve had for a long time, for example, might actually hurt your credit score. If you can, try to keep lines of credit – especially revolving credit accounts, like credit cards – open. 

If You’re Rejected, Pause Before Applying Again: If you’ve been rejected for a line of credit in the past, like an auto loan or a credit card, pause before immediately applying again. Multiple “hard inquiries” – when a lender pulls your credit to evaluate your creditworthiness – in too short a time could potentially harm your credit. 

Good credit is always important

If you’re worried about your credit, the best thing you can do is consistently check and monitor your credit – not just your score. Be on the look out for any changes to your credit reports and score, whether expected or unexpected, and make sure that everything in your credit profile is accurate.  You can get started with a free credit assessment at Lexington Law for a snapshot of what’s in your credit profile.

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