Americans’ credit scores have come a long way in a decade.
The average FICO score has reached a new high of 706, FICO said Tuesday, having edged up consistently over the past nine years. The national average previously reached a low of 686 in October of 2009, at the tail end of the Great Recession. Last year’s average was 704.
A score within the range of 670 to 739 is considered “good,” according to FICO, while the 740 to 799 range is “very good” and 800-plus is “exceptional.”
There appear to be three key drivers contributing to these steadily rising scores, Ethan Dornhelm, the vice president of FICO scores and predictive analytics, told MarketWatch in an email. One is a “stable and growing economy driving low unemployment, higher wages, and greater financial health,” he said. There’s also heightened consumer awareness of FICO scores, he said, pointing to a 2018 Sallie Mae study that found customers who frequently check their FICO scores are more responsible with their finances.
“Negative information has been removed from credit files, driven both by the Fair Credit Reporting Act-mandated requirement to purge negative information from consumer credit files after 7 years, as well as by refined reporting standards implemented by the credit bureaus (e.g. the National Consumer Assistance Plan),” Dornhelm added. (The National Consumer Assistance Plan was an effort led by Equifax EFX, -3.11% , TransUnion TRU, -3.37% and Experian EXPGY, -3.98% to make credit scores more accurate, in part by removing data such as medical debts.)
The score provided by FICO, named for the Fair Isaac Corporation, is widely used as a measure of a person’s creditworthiness — in other words, his or her reliability in paying back loans — for lending decisions like auto loans and mortgages.
The average-score increase is due to