FICO Reports Drop In National Average Credit Score
New data from scoring company FICO says the national average credit score is on the decline. The average FICO score has dropped by two points since 2024, lowering the national average to 715. A credit score is a mathematical formula that helps lenders determine how likely you are to pay back a loan. Credit scores are based on your credit history and range from 300 to 850. FICO’s report says credit card balances are ballooning, with the average utilization at 35-percent, up from 29-percent in 2012. Student loan delinquencies are also at a record high, as six-point-one million consumers had a student loan delinquency report added to their credit card file from February to April. Gen Z consumers have been hit the hardest, with an average score now of 676, FICO says Gen Zers saw an average score decrease of three points, marking the largest year-over-year score drop of any age group since
The report found that 34% of Gen Z consumers have open student loans, compared to 17% of the total population, and the decline in credit scores is primarily due to the resumption of student loan delinquency reporting.
The U.S. Department of Education paused federal student loan payments in March 2020, offering borrowers relief during the economic chaos of the coronavirus pandemic. Though payments were set to resume in 2023, the Biden administration provided a one-year grace period that ended in October 2024.
This summer, the Trump administration restarted the collection process for outstanding student loans, with plans to seize wages and tax refunds if the loans continue to go unpaid. Roughly 5.3 million borrowers who are in default could have their wages garnished by the federal government.
Between student loans, a tough job market, and high inflation, young consumers are struggling to make payments on time, according to the report. A low credit score makes it more complicated or more expensive to obtain car loans, mortgages, credit cards, auto insurance, and other financial services.
If your credit score has dropped recently, here are some experts’ recommendations: Experian, FICO and Credit Karma are among the companies that let you check your credit score for free.
While your credit score is essential to keep your financial life healthy, it’s important to remember that it’s just a number and it doesn’t define you as a person.
When it comes to the score calculation, one of the most critical factors is paying on time, whether that’s the minimum payment or the full balance.The one most important factor in the FICO score calculation is whether you make your payments on time. And that’s about 35% of the score calculation,” Lee said.
If you’re juggling several credit card payments and other debts, It’s recommended that you set automatic payments.
Keeping your credit utilization low and avoiding acquiring new debt can help you increase your credit score. Credit utilization is the percentage of the credit you’re currently using from across all your available credit.
While a low percentage is good for your credit score, it’s not recommended to have your credit utilization at 0%. Instead experts recommend you keep it between 10% and 30%.
If you’re struggling to pay off the debt you currently have, it’s best if you don’t acquire more debt if you can avoid it. Credit scores change as your financial behavior does, so Lee recommends that if you’re not happy with your current credit score, you look to implement new habits in your financial life.
“The FICO score is dynamic. It changes based on how you make your payments. So your score, if you want to maintain it or improve it, you can do so by exhibiting good credit behavior,
