U.S. Consumers Achieve Record-High Credit Scores

Diccon Hyatt is a seasoned financial and economic journalist who has extensively covered the pandemic-era economy through hundreds of insightful articles over the last two years. He specializes in breaking down intricate financial concepts into clear, accessible language, focusing on how economic trends influence personal finances and the broader market. His experience includes work with U.S. 1, Community News Service, and the Middletown Transcript.

Key Insights

• The average U.S. credit score climbed to a historic peak of 718 in April, rising two points from 716 in October, according to FICO.
• A robust labor market contributed to this improvement despite ongoing inflation and elevated interest rates on credit cards and other consumer debts.
• Credit scores increased during 2020 and 2021 as consumers reduced credit card debt but plateaued in 2022 following the conclusion of government pandemic relief programs.

American consumers are now in their strongest position ever when it comes to creditworthiness, as indicated by a key financial metric.

FICO reported that the average credit score among U.S. consumers reached 718 in April, up from 716 last October. This marks the highest average credit score ever recorded by the company, which calculates scores using data from the three major credit bureaus.

Credit scores help lenders assess a borrower’s reliability, making the national average a vital indicator of the country’s overall credit health. Can Arkali, FICO’s senior director of analytics, highlighted in a blog post that the average U.S. credit score has steadily increased for nearly a decade, remaining above the threshold lenders consider "good" credit risk (670-739) since 2013.

Several factors contributed to the rise in credit scores in early 2023: a strong employment market, easing inflation compared to the previous year, and new credit bureau policies that removed medical debts under $500 from credit reports, according to Arkali.

These positive influences counterbalanced ongoing financial pressures from persistent inflation and higher interest rates on consumer loans, driven by the Federal Reserve’s efforts to curb inflation.

Nonetheless, FICO’s data also reveals increasing financial strain for some households. As of April, 17.3% of Americans had at least one payment overdue by more than 30 days in the past year, up from 15.2% in April 2022. Additionally, average credit card balances rose to $6,898 in April 2023 from $5,988 the previous year, echoing trends reported by the Consumer Financial Protection Bureau (CFPB).

Government pandemic relief funds helped consumers reduce credit card debt and shorten the duration of balances carried in 2021, according to a recent Government Accountability Office (GAO) report analyzing Federal Reserve consumer financial data. This contributed to the credit score improvements.

However, as the economy reopened and relief programs ended, consumers have resumed using credit cards more frequently, increasing their spending across various goods and services.

If you have news tips for Investopedia reporters, please reach out via email at tips@investopedia.com.

Discover the latest news and current events in Personal Finance News as of 04-11-2023. The article titled " U.S. Consumers Achieve Record-High Credit Scores " provides you with the most relevant and reliable information in the Personal Finance News field. Each news piece is thoroughly analyzed to deliver valuable insights to our readers.

The information in " U.S. Consumers Achieve Record-High Credit Scores " helps you make better-informed decisions within the Personal Finance News category. Our news articles are continuously updated and adhere to journalistic standards.