Credit Union Borrowers’ Average FICO Score Slightly Decreased over the Last 2 Years
Debt and missed payments continue to rise, contributing to a change in the average
FICO® Scores harness data from U.S. consumer reporting agencies (CRAs) to produce FICO Scores and are predictive of a consumer’s credit risk. FICO Scores are predictive, reliable, and evolve as changes in consumer behavior are reflected in credit reports. The FICO Analytics team tracks these changes, in aggregate and over time.
This year, the team also looked specifically at borrowers who have at least one open account at a credit union in their credit history. As of January 2024, the national average FICO® Score for credit union borrowers in the US stands at 724, one point lower than January 2023, and two points lower than January 2022.
Despite the decreases in each of the past two years, credit union borrowers still have an average FICO Score that is slightly higher than the national population since they are less likely to default on their credit obligations than other borrowers.
Figure 1. The national average FICO® Score for credit union borrowers decreased by one point from January 2023 to January 2024.
Over the last two years;
- increased spending,
- the end of government stimulus programs,
- the return of payment accommodations to their pre-pandemic levels,
- and the effects of high interest rates and increased prices
may be negatively impacting some credit union members’ credit risk – especially those struggling to manage their financial health.
The one-point drop in the average credit score of credit union borrowers in each of the last two years is likely driven by increases in missed payments and rising consumer debt levels. Here are some of the key trends impacting the credit health of credit union borrowers that may interest credit union lenders:
Missed payments have increased year-over-year and are at pre-pandemic levels. The percentage of credit union borrowers with a severe 90+ day delinquency in the last six months increased year-over-year, from 6.5% in January 2023, to 7.6% in January 2024. This is slightly higher than 7.5% as of January 2020.
Paying bills on time can positively impact the FICO Score, “Payment History” which represents 35% of the credit score calculation. Late payments could have a more negative impact.
- Consumer debt is now higher than pre-pandemic levels. As of January 2024, the average credit utilization for the credit union population was at 39%. This is up from 37% in both January 2023, and January 2020. Credit card balances increased to $9,758, up 11% from January 2023, and 10% from January 2020. This increase in credit card account debt is likely driven by persistent inflation and high interest rates.
Maintaining low balances on credit cards can have a positive impact on the FICO® Score because the “Amounts Owed” category represents 30% of the overall credit score calculation.
- New credit activity slowed down. As of January 2024, 56% of the credit union population has opened at least one new credit account of any type in the past year. This is down from 60% as of January 2023 and January 2020. This decrease could be attributable to higher interest rates making it less appealing to open new accounts.
Those who refrain from opening new credit accounts, can maintain or improve their standing in the “New Credit” category, which represents 10% of the FICO® Score calculation.
In recent years, the aggregate credit union borrower population has seen a steady increase in default rates and consumer debt, resulting in a one-point drop in the national average credit score for two consecutive years. Credit risk will likely depend on whether high interest rates and elevated consumer prices continue to impact the financial health of borrowers. The economic uncertainty of credit union borrowers may also be influenced by the outlook of the jobs market and wage growth.
FICO is committed to helping lenders better understand the credit risk that each borrower represents, thereby guiding them to make more informed lending decisions. Through portals such as myFICO.com where consumers may perform a credit score check and programs like Score a Better Future and FICO® Score Open Access, we continue to educate and empower consumers. We substantially invest in safe and responsible financial inclusion by offering alternative data-driven solutions such as UltraFICO™ Score to provide millions of people with an onramp to mainstream credit access.
If you have more questions, please visit these helpful resources:
Lenders and borrowers may learn more about what makes up a good credit score by reading, “The Perfect Credit Score: Understanding the 850 FICO Score”, and our eBook “Understanding Your FICO® Scores.”
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