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The average credit score in the U.S. has hit a historic high of 718, according to a new report from FICO, the leading credit score analytics provider. After the score stayed stuck at 716 in 2021 and 2022, its recent rise is confounding.
That’s because consumers have racked up massive debt over the past couple of years. From high mortgage payments to expensive credit cards, everyone’s spending more thanks to inflation, rising interest rates and a tight housing market.
What’s going on here?
Ethan Dornhelm, FICO’s vice president of scores and predictive analytics, says that changes in credit reporting rules and consumer behavior may help explain the combination of higher FICO scores and mounting consumer debt. “The three drivers for higher scores that really stick out to me,” he says, “are a drop in credit-seeking behavior, some medical debt that’s been removed from reports and the continued education and empowerment in understanding credit data and credit score.”
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Consumers Don’t Want New Credit
The number of new credit accounts you have is one of the five components of your FICO credit score calculation, accounting for 10% of the score. The other four components are payment history (35%), amounts owed (30%), length of credit history (15%) and credit mix (10%).
Dornhelm notes that, according to FICO’s data, fewer people are applying for and getting new credit.
“The rate of hard inquiries and new lines of credit has dropped in recent months,” Dornhelm says.
Your Medical Debt May Have Been Erased
Although just a small percentage of consumers carry significant medical debt—around 10%—new policies around medical debt reporting may also be helping to boost credit scores.
Earlier this year, the three main credit reporting bureaus, Equifax, Experian and TransUnion, adopted policies to remove any medical debt under $500 that was reported by collection agencies. That move came after the agencies’ decision to remove all paid medical debt from credit reports starting in July 2022.
You May Be Paying Closer Attention
More consumer awareness about the importance of good credit may be another factor in higher FICO scores, Dornhelm says.
Errors in a credit report can bring your credit score down, and they’re common. According to a Consumer Reports survey of 7,000 consumers, more than one-third (34%) of respondents said they found at least one error on their report, 29% noticed errors in personal information and 11% discovered account information errors.
But people who check their credit reports often are more likely to spot errors and correct them.
Prompt Mortgage Payments Raise Scores, but Renters Get Little Reward
Mortgage payments are regularly reported to the credit bureaus, so making your payments on time can significantly improve your score, even if you’re also carrying more debt. On a larger scale, recent data from across the nation reveals an all-time low for serious mortgage delinquencies–payments that are late by 90 days or more–according to analysis by CoreLogic, a data analytics company.
Renters, though, aren’t typically rewarded for prompt payments, says Dornhelm. “FICO did an analysis that showed 2% to 3% of renters had their rent reported,” he says. “The entire credit reporting system is voluntary…So property owners may not want to subject themselves to the [Fair Credit Reporting Act] if they don’t have to.”
How To Maintain a High Credit Score
- You can (and should) get your free FICO Score as often as possible. Consumers are entitled to one free credit report from each of the main credit reporting agencies each year. You can get all three at once or stagger them throughout the year.
- Use your credit card to check your credit score. Many credit card companies offer free credit reports and credit scores. If yours does, that can be an easy and inexpensive way to keep an eye on your credit profile.
- Look over your credit reports carefully. The credit bureaus sometimes have incorrect information, and some of it is disallowed. If you spot paid medical debt or medical debt under $500 on any of your credit reports, for example, contact the reporting agencies immediately.
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FAQs
Mortgage payments are regularly reported to the credit bureaus, so making your payments on time can significantly improve your score, even if you're also carrying more debt.
Can you have high credit score with high debt? ›
People who have good credit scores and a lot of debt are likely in that boat because they have a good mix of loans and credit products — not just a high dollar amount. And of course, they make all of their payments on time.
Why didn't my credit score go up after paying off debt? ›
There's a lag in credit reporting
As a result, the major credit bureaus -- Experian, Equifax and TransUnion -- only update credit reports once every 30 to 45 days. So if you recently paid off debt, it may not reflect on your credit score by the time you check.
Why did my credit score go from 524 to 0? ›
Credit scores can drop due to a variety of reasons, including late or missed payments, changes to your credit utilization rate, a change in your credit mix, closing older accounts (which may shorten your length of credit history overall), or applying for new credit accounts.
What percentage of the US population has a perfect credit score? ›
In the U.S., only about 1.7 percent of the scorable population had a perfect 850 FICO credit score in April 2023, according to FICO data. This suggests that for most people, a perfect score is simply too hard to reach — but it also suggests that it's not really necessary, either.
Is a 900 credit score possible? ›
Highlights: While older models of credit scores used to go as high as 900, you can no longer achieve a 900 credit score. The highest score you can receive today is 850. Anything above 800 is considered an excellent credit score.
Why is my credit score so low when I have no debt? ›
Various weighted factors mean that even with no credit, your credit score could still be low because the length of your credit history or credit mix, for example, could also be low.
How to get 800 credit score? ›
Making on-time payments to creditors, keeping your credit utilization low, having a long credit history, maintaining a good mix of credit types, and occasionally applying for new credit lines are the factors that can get you into the 800 credit score club.
How to raise your credit score 200 points in 30 days? ›
How to Raise your Credit Score by 200 Points in 30 Days?
- Be a Responsible Payer. ...
- Limit your Loan and Credit Card Applications. ...
- Lower your Credit Utilisation Rate. ...
- Raise Dispute for Inaccuracies in your Credit Report. ...
- Do not Close Old Accounts.
Similarly, if you pay off a credit card debt and close the account entirely, your scores could drop. This is because your total available credit is lowered when you close a line of credit, which could result in a higher credit utilization ratio.
Credit score required: 620
Conventional loans are the most common type of mortgage, accounting for about 70% of the market. They usually require a 620 credit score, though some lenders will consider applicants with scores as low as 580.
Can you live with a zero credit score? ›
Having no credit score makes it more difficult to access financing for anything from a cellphone to a car or home. Even if you don't plan to borrow money in the near future, having a good credit score can still make life easier in a number of ways: Get access to favorable credit terms.
Can I get a car with a 524 credit score? ›
With a bad credit score, you'll likely be offered some of the highest advertised rates. According to data from Experian, borrowers in the subprime category (a FICO score between 501 and 600) can expect an average rate of 12.28 percent for new cars and 18.89 percent for used cars.
How rare is an 800 credit score? ›
How rare is an 800 credit score? An 800 credit score is not as rare as most people think, considering that roughly 23% of adults have a credit score in the 800-850 range, according to data from FICO. A score in this range allows consumers to access the best credit card offers and loans with the most favorable terms.
How rare is a 750 credit score? ›
Your credit score helps lenders decide if you qualify for products like credit cards and loans, and your interest rate. You are one of the 48% of Americans who had a score of 750 or above as of April 2023, according to credit scoring company FICO.
What is the average Americans credit score? ›
In the U.S., the average credit score is 716, per Experian's latest data from the second quarter of 2023. And when you break down the average credit score by age, the typical American is hovering near or above that score.
What is considered a high credit debt? ›
Anything over 30% credit utilization will decrease your credit score. So, you can use this as a measure of when you have too much debt. Consolidated Credit offers a free credit card debt worksheet that makes it easy to total up your current balances and total credit limit.
How much debt is considered high? ›
Generally speaking, a good debt-to-income ratio is anything less than or equal to 36%. Meanwhile, any ratio above 43% is considered too high. The biggest piece of your DTI ratio pie is bound to be your monthly mortgage payment.
What is considered a lot of credit debt? ›
Your credit score
Once this number gets above about 30%, it's bad for your credit. So, if you have $5,000 in credit card debt and $10,000 in credit limits, that 50% utilization would hurt your credit.
What is a realistic high credit score? ›
For a score with a range between 300 and 850, a credit score of 700 or above is generally considered good. A score of 800 or above on the same range is considered to be excellent. Most consumers have credit scores that fall between 600 and 750.
