Average U.S. FICO Score at 717 as More Consumers Face Financial Headwinds
Outlier or Start of a New Credit Score Trend?
Late last year, we reported that after a 2-point increase from the year prior, the national average FICO® Score held steady from April 2023 to July 2023 at 718.
The latest credit score data is in and as of October 2023, the national average FICO® Score now stands at 717. This is one point lower than it was earlier in 2023 and reflects the first time the metric has decreased in a decade as shown in Figure 1. Given that the FICO Score is a lagging, not leading, economic indicator, this suggests that the effects of high interest rates and persistent inflation may be starting to weigh on consumers, especially those already struggling to manage their finances.
Average FICO® Score 8 | |||||||
October 2005 | 688 | April 2011 | 688 | October 2015 | 696 | April 2020 | 708 |
October 2006 | 690 | October 2011 | 689 | April 2016 | 699 | October 2020 | 713 |
October 2007 | 689 | April 2012 | 690 | October 2016 | 699 | April 2021 | 716 |
April 2008 | 690 | October 2012 | 689 | April 2017 | 700 | October 2021 | 716 |
October 2008 | 689 | April 2013 | 691 | October 2017 | 701 | April 2022 | 716 |
April 2009 | 687 | October 2013 | 690 | April 2018 | 704 | October 2022 | 716 |
October 2009 | 686 | April 2014 | 692 | October 2018 | 705 | April 2023 | 718 |
April 2010 | 687 | October 2014 | 694 | April 2019 | 706 | July 2023 | 718 |
October 2010 | 687 | April 2015 | 695 | October 2019 | 706 | October 2023 | 717 |
Figure 1. Having stabilized earlier in the year, the national average FICO® Score decreased by one-point in late 2023.
The data indicates that the one-point drop in the average FICO® Score during this period is driven by increases in missed borrower payments and consumer debt levels. Let’s dive into some of the key trends impacting average credit scores, including overall consumer credit files and credit health, in a bit more depth:
Missed payments continue to rise: As of October 2023, just over 18% of the population have had a 30-day or worse past-due payment on one or more credit accounts in the last year. This is up by 4% compared to April 2023.
While missed payments on mortgages and auto loans have gone up, they are still below their pre-pandemic levels. Missed payments on bankcards have increased, and now exceed their 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. This can lead to higher credit card utilization and subsequent defaults on credit card payments. Paying bills on time can have a significant and positive impact on the FICO® Score with the “Payment History” category representing 35% of the overall FICO Score calculation.
- Consumer debt is higher than pre-pandemic levels: As of October 2023, the average credit utilization was at 35%. This is up not only from 34% as of April 2023, but also from 33% as of April 2020 and from 34% as of October 2019 (which can be viewed as a seasonally adjusted pre-pandemic benchmark).Credit card balances exceeded $1 trillion (about $3,100 per person in the US) last fall and increased by another $50 billion (about $150 per person in the US) in Q4 of 2023, based on the latest fed from the Federal Reserve Bank of New York. Data from the Federal Reserve also indicates that revolving credit, which can be viewed as a proxy for credit cards, increased at an annual rate of 17.7% in November 2023. Persistent inflation and increases in the cost of securing and carrying debt appears to be causing consumers, especially those with limited cashflow, to carry increased levels of debt. Keeping balances low on credit cards can have a substantial and positive impact on the FICO® Score. In fact, the “Amounts Owed” category which is heavily weighted towards credit card balances and utilization represents 30% of the overall FICO Score calculation.
New credit activity slows down: As of October 2023, 44.4% of the population has opened at least one new credit account in the past year. This is down not only from 45.5% as of April 2023, but also from 47.3% as of April 2020 and 47.2% as of October 2019. This decrease from April to October in 2023 was likely driven by the continued decline in mortgage origination volumes in the same period. The latest report from the Federal Reserve illustrates that mortgage origination volumes were at $394 billion in Q4 of 2023 -- a modest increase from the previous quarter, but still well below the trillion dollar quarterly origination volumes witnessed between 2020 and 2021.
While auto loan and lease origination volumes were largely unchanged between April and October in 2023, aggregate credit limits increased by 2.5% in the same period suggesting that consumers were obtaining more credit either by securing higher limits on their existing credit cards or by opening new credit card accounts. This trend indicates an offset by the decline in mortgage origination volumes with fewer borrowers obtaining credit between April and October in 2023. The “New Credit” category represents 10% of the FICO® Score calculation, and this deceleration in credit seeking behavior over the past year can, to a certain extent, offset the effects of increases in consumer delinquency and debt levels.
Figure 2. FICO® Score population has continued to degrade in key metrics between April and October 2023.
Our latest credit score data provides evidence of persistent increases in default rates and re-leveraging of consumer debt. While these emerging score trends do not seem to be substantial enough in aggregate to materially move the national FICO® Score distribution downwards, they were significant enough to cause the national average FICO Score to drop by one point in late 2023. Whether this average score drop is an anomaly, or an early warning of an inflection point in consumer repayment behavior will depend on a few factors: will high inflation and elevated consumer prices continue to place financial stress on borrowers and lead to more missed payments and increased debt levels, resulting in a downward shift in the national FICO® Score distribution, or will the Federal Reserve’s interest rate decisions and the outlook of the jobs market throughout the new year help alleviate the economic uncertainty which consumers are facing today?
FICO will continue reporting on these score trends and is committed to helping lenders better understand the credit risk that each borrower represents and make better-informed lending decisions. Through portals such as myFICO.com and programs such as Score a Better Future and FICO® Score Open Access, we will continue to educate and empower consumers. We continue to invest heavily in safe and responsible financial inclusion by offering alternative data-driven solutions such as FICO® Score XD and the UltraFICO™ Score to provide millions of consumers with an onramp to mainstream credit.
To learn more about FICO® Scores, check out these resources:
How is FICO helping with financial inclusion?
Popular Posts
Average U.S. FICO® Score at 716, Indicating Improvement in Consumer Credit Behaviors Despite Pandemic
The FICO Score is a broad-based, independent standard measure of credit risk
Read more
The GSE Data Is Public. Here's What It Shows About Credit Score Modernization.
Independent Milliman analysis of GSE historical data confirms what anyone can now verify directly: FICO® Score 10T is the most predictive score.
Read more
FICO® Score High Achievers: Is Age the Only Factor?
<p>FICO’s latest research on <a href="http://www.fico.com/en/blogs/risk-compliance/us-credit-quality-rising-the-beat-goes-on/" target="_blank">national FICO® Score distribution</a> shows that US credit quality continues to trend upwards, with an increasing number of consumers scoring in the highest scores ranges. Given that, we decided it was time to refresh our study on “<a href="http://www.fico.com/en/blogs/risk-compliance/infographic-what-does-a-high-credit-scorer-look-like/" target="_blank">FICO® Score high achievers</a>,” where we examine the credit behavioural profiles of consumers with higher credit scores.</p> <p>As expected, our latest study showed that older people generally have higher scores, as has been the case in our <a href="http://www.fico.com/en/blogs/risk-compliance/age-before-beauty-credit-worthiness-before-youth/" target="_blank">past research</a>. This is largely because they have trade lines that have been open longer, which leads to higher scores (assuming the trade lines are in good standing and all other things equal). The most credit savvy among you will remember that length of credit history accounts for roughly 15% of the overall <a href="http://www.myfico.com/CreditEducation/WhatsInYourScore.aspx" target="_blank">FICO® Score calculation</a>.</p> <p>But for younger consumers, it isn’t too helpful to say, “just wait until you are 50 years old, and that will fix things!” Thus, I decided to dive deeper with our analysis, including looking at the credit behavioural characteristics of younger consumers with high FICO® Scores.</p> <p>In this analysis, I looked at credit characteristics for the two highest score bands, 750-799 and 800-850, which have about 16% and 23% of the population, respectively. I further broke this down by looking at the characteristics of the youngest 15% in each group, which occurs at age 29 for the 750-799 group and 43 for the 800-850. We used FICO<strong>®</strong> Score 9 for our analysis, and examined typical variables of the categories that go into the make-up of the score.</p> <p><a href="http://www.fico.com/en/blogs/wp-content/uploads/2016/10/FICO-Score-High-Achiever-table.png"><img class="alignnone size-full wp-image-29367" src="http://www.fico.com/en/blogs/wp-content/uploads/2016/10/FICO-Score-High-Achiever-table.png" alt="fico-score-high-achiever-table" width="715" height="747" /></a></p> <p>Since there’s a lot to dissect in this chart, I’ll highlight a few findings that struck me: <ul> <li><strong>Credit history.</strong> Higher scores are undoubtedly associated with a longer time on file. What’s striking is the higher average time on file for the 800+ group, both overall and for revolving accounts (the most common trade line). Clearly, it helps to start credit use early in life – but that’s not the sole determining factor for high scoring. The younger cohorts in both the 800+ and 750-799 groups have time on file medians significantly less than their older counterparts.</li> <li><strong>New credit.</strong> High credit scorers do, in fact, pursue new credit. We see little variation in months since last trade line opening and last inquiry among all groups observed.</li> <li><strong>Pay on time.</strong> As you might expect, the further in the past the delinquency, the higher the score – and that’s <u>if</u> a delinquency ever happened. 95% of the 800+ people and 72% of the 750-799 group have never been delinquent, which is a striking contrast to the 57% for the total population. The percentages for the younger groups are even higher, especially so for the 750-799ers. Collection items are also scarce for these high scorers. While 23% of the national population have collection items greater than $99, the figures are only 0.5% for the 800+ group and 3% for the 750-799 group. It is clear that, in conjunction with starting a credit file early, paying on time is a key trait of the FICO® Score high achiever.</li> <li><strong>Balance and utilization.</strong> Finally, we look at how credit is being used, focusing on revolving product use. (Since most people only have one mortgage or one auto loan, variation in instalment product figures is minimal and driven by payment history, which is near perfect for high scorers, as we’ve seen.) FICO® Score high achievers tend to have more open revolving accounts. While the % active trades and utilization are generally lower, by no means do high scorers avoid the use of credit products. What drives the difference here is the amount of <u>available</u> revolving credit utilized. The 800+ group is roughly 1/4 of the national median, both in total and on their highest utilized card; they also have lower balances and more cards<em>. </em>The 750-799 group is more active and higher utilized, but still only at 2/3 of the national figures. The young 750-799 group compensate with lower revolving balances and, as a result, lower utilization, which is in line with what we see for the 800+ group.</li> <li><strong>Benchmarks.</strong> I’d like to point out that while this study provides good benchmarks of the typical credit traits of the FICO® Score high achiever, individual credit profiles will vary widely. And keep in mind that when we sort groups of consumers as a whole by different behaviours, some results may look superficially odd. For example, the 800+ band has a longer median average open account time (128 months) than average revolving months on file (140 months).</li> </ul> So, what do we conclude? A huge takeaway is that high scorers don’t have too much in the way of serious delinquencies and negative public record data.</p> <p>In most respects, the young 800+ people are like their peer group. They really only differ markedly in their shorter credit history and higher non-mortgage balance, both of which are a function of life stage. Our results show that you don’t have to be a credit product hermit; these high scorers have more credit cards. The takeaway is to start credit activity early and maintain well-managed and moderate usage.</p> <p>In many ways, the young 750-799 people are more interesting because their age profile is much younger. Their credit characteristics differ more from their peer group, particularly in terms of length of credit history. They compensate by having almost pristine credit records and lower balances.</p> <p>Ultimately, 39% of US consumers are FICO® Score high achievers, which they accomplish by following common-sense credit practices. It ain’t rocket science!</p>
Read moreTake the next step
Connect with FICO for answers to all your product and solution questions. Interested in becoming a business partner? Contact us to learn more. We look forward to hearing from you.