The national average credit score — which had been steadily increasing for over a decade — fell for the second year in a row, according to a new report from FICO, developer of one of the scores most widely used by lenders.
The average score is now 715, down from 717 in 2024 and 718 in 2023. FICO scores range between 300 and 850.
High interest rates and higher prices have been a drag on many Americans’ financial standing. Consumers, overall, are falling deeper into debt, causing an increase in credit card balances and an increase in missed payments, FICO found. That contributed to the average score decline.
“I’m not surprised that credit scores are slipping,” said Matt Schulz, chief credit analyst at LendingTree. “Millions of Americans are struggling mightily in the face of stubborn inflation, high interest rates, a difficult job market and overall economic uncertainty — and tough times often force tough decisions.”
Student loan delinquencies are key factor
The resumption of federal student loan delinquency reporting on consumers’ credit was another significant contributing factor to declining scores, according to FICO.
In a March report, the Federal Reserve Bank of New York warned that student loan borrowers who are late on their payments would experience “significant drops” in their credit scores.
Initially, those borrowers benefitted from the pandemic-era forbearance on federal student debt, which marked all delinquent loans as current. Median credit scores for student loan borrowers increased by 11 points between the end of 2019 to the end of 2020, the Fed researchers found. However, that relief period officially ended on Sept. 30, 2024.
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The resumption of student loan delinquency reporting led to a spike in the rate of recent, severe delinquencies, according to FICO’s report.
Further, student loan delinquencies could continue to increase in the months ahead, largely due to changes in the availability of income-driven repayment plans, according to Tommy Lee, senior director of scores and predictive analytics at FICO.
Not all borrowers are struggling
While the recent “K”-shaped economic recovery caused financial stress for some borrowers, others have strengthened their financial position. Now, more consumers score in the highest and lowest score ranges, FICO also found.
“While the average score has gone down, there are consumers who are benefiting from all-time highs in the stock market and appreciating home prices,” said Lee. “They’ve become wealthier with the dynamics in the stock market and the real estate market.”
How to get a better credit score
For those who have suffered the consequences of lower credit scores, which could include reduced credit limits, higher interest rates for new loans and restricted credit access overall, there are ways to boost your score almost immediately, experts say.
“One of the important things to know is that FICO scores are dynamic,” Lee said.
Some of the best ways to improve your credit score come down to paying your bills on time every month, only applying for credit as needed and keeping your utilization rate, or the ratio of debt to total credit, below 30% to limit the effect that high balances can have, Lee said.
Increasing your credit score to very good (740 to 799) from fair (580 to 669) could save you more than $39,000 over the lifetime of your balances, an analysis earlier this year by LendingTree found — with the largest impact from lower mortgage costs, followed by preferred rates on credit cards, auto loans and personal loans.
“There’s very little in life that’s more expensive than having crummy credit,” LendingTree’s Schulz said. “It can cost you tens of thousands of dollars over the years in fees and interest.”