Average FICO Score Continues to Rise; Hits 716 in April 2021
FICO recently announced that the average FICO credit score hit 716 in April 2021, which is eight points higher than one year ago and five points higher than the average score reported in October 2020. The upward trend indicates improvement in consumer credit behaviors, despite the COVID-19 pandemic.
The increase in scores is largely from consumers in the lower score ranges; consumers with scores between 550-599 as of January 2020 had an average score of 601 in April 2021. Alternatively, consumers in lower risk/higher scoring segments with scores between 750-799 in January 2020 saw almost no movement between April 2020 and the present.
One of the main reasons for improved scores is fewer missed payments; as of April 2021, 15 percent of consumers had a 30+ day past due missed payment in the last year, which fell from 19.6 percent in April 2020. The ‘payment history’ portion of the credit file represents nearly 35 percent of the total FICO Score calculation.
FICO also reported that consumer debt levels are decreasing, as consumers have had fewer opportunities to participate in discretionary spending. Consumers have shifted their spending focus to paying down credit card debt, resulting in a more than 10 percent decrease in the average credit card balance and utilization in the U.S.
FICO noted that fewer consumers are actively seeking credit, contributing to the average increase. There has been a 12.1 percent year-over-year decline in the average number of hard credit inquiries, which is linked directly with the new consumer focus on paying down debt and reducing spending.
Consumers have also become increasingly aware about the impact of credit reports and credit scores since the pandemic’s onset. FICO has made an effort to empower consumers through education programs like Score a Better Future, which helps consumers understand their credit health and reach their financial goals.