The national FICO score average is still 716| credit cards

The national average FICO credit score did not increase between April 2021 and April 2022, according to New Data from FICO. Although the average score remains solidly in good territory at 716, this is the first time since October 2012 that the average FICO score has not increased year over year, following a sharp increase in the first year of the COVID-19 pandemic.

This development is nothing to worry about, says Can Arkali, senior director of scores and predictive analytics at FICO. With an average score of 716, “it’s evident that consumers have become more aware of their creditworthiness,” he says.

There are several reasons why the national average FICO score has stayed the same, and there are still many steps consumers can take to improve their own credit scores.

Why the average FICO score hasn’t increased

Small changes in consumer behavior affecting FICO scores help explain the situation. “While levels are still below pre-pandemic levels, both defaults and consumer debt have increased slightly, and more consumers have received new credit near pre-pandemic levels, all of which are key drivers of the FICO score,” Arkali says .

The percentage of the population with a payment late of at least 30 days at any time during the year increased by just over 1% year-on-year. Missed payments are significant, as payment history accounts for 35% of a consumer’s FICO score.

Average credit card usage increased by 5% between April 2021 and April 2022, but remained below April 2020 levels.

At the same time, average credit card balances increased a little over 7% year over year, according to FICO. Amounts owed make up 30% of the FICO score, and consumers with credit utilization rates above 30% are likely to receive lower scores.

This increased use could be dangerous in the current environment of rising interest rates. “The cost of borrowing money is higher now,” says John Bergquist, managing director of Lift Financial. “This means debt repayments will be larger.”

Year after year, more consumers are opening new loans. New loans make up 10% of the FICO score calculation, and too many tough credit requests lower your credit score.

Bergquist is urging consumers to ditch borrowing as interest rates are likely to keep rising. “Inflation is also extremely high,” he says. “That means Americans are paying more for everyday things and have less money to pay off debts.”

How has the first year of the pandemic affected credit scores?

In the first year of the pandemic, the average FICO score “went up significantly,” says Arkali. The national average rose from 708 to 713 between April and October 2020.

“The combination of government stimulus programs like the CARES Act and payment acceptance programs offered by lenders have allowed millions of consumers to breathe easy and pay off debt on time, which is a factor rewarded by the FICO score,” he says .

How to improve your credit score today

The advice for improving your credit hasn’t changed: “To have a good FICO score, keep your debt low and pay your debts on time,” says Arkali. This applies to all types of credit, including installment loans and credit cards.

As new credit card accounts have increased among consumers, they should consider that new credit is also a factor in creditworthiness and consider how they pay their monthly credit card bills, Arkali says.

“When it comes to paying off credit card debt, prioritizing repayments from credit cards that are closest to the maximum may benefit consumers more than spreading equal payments across multiple credit cards,” says Arkali.

You should also consider factors of how closing a credit card would affect your balance. “You should also keep lines of credit open, since closing lines of credit will negatively impact your credit score,” says Bergquist.

For its part, FICO provides resources including Score a Better Future, a program aimed at improving financial literacy through education and credit counseling.

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