According to FICO statistics, average credit scores have dropped somewhat to 717 for the first time in ten years. The average score in 2023 was 718.
According to FICO statistics, average credit scores have dropped somewhat to 717 for the first time in ten years. The average score in 2023 was 718. (Photo : Avery Evans / Unsplash)
High interest rates and inflation are probably to blame for this reduction since they are making it more common for customers to skip payments and accumulate more debt. Over 18% of Americans have late payments on one or more credit cards since October. According to FICO, this is a 4% increase from April 2023.
According to a report from FICO, missed payments on credit cards have surged above pre-pandemic levels, despite missed payments on mortgages and auto loans remaining lower, albeit increased from previous levels. FICO attributes this trend to the combined effects of higher interest rates, elevated consumer prices, and economic uncertainty, particularly impacting consumers relying heavily on credit cards for day-to-day expenses. The strain from these factors often leads to increased credit card utilization and subsequent defaults on payments.
FICO suggests that one method to improve credit scores is through debt consolidation and accelerated repayment. Platforms like Credible offer assistance in finding suitable loans by connecting individuals with reputable personal loan lenders, facilitating a quicker repayment process.
Medical Debt
To reduce the negative impact of medical debt on credit ratings, state governments are implementing measures.
Arizona's governor, Katie Hobbs, has declared that the state will start collaborating with a nonprofit organization called RIP Medical Debt to waive medical debt for all residents of the state. This debt forgiveness will help more than a million residents of Arizona.
Currently, around $30 million in COVID relief money are going toward helping certain citizens of Arizona get their medical debts cancelled. Forgiveness is available to those making less than 400% at or below the federal poverty level or to those who owe more than 5% of their yearly income.
California is attempting to mitigate the impact of medical debt as well. Attorney General Rob Bonta declared his support for a bill that would prevent medical debt from showing up on credit records, as put forth by state Senator Monique Limón.
California would be the third state to exclude medical expenditures from credit reports if the proposal is approved. In 2023, Colorado and New York followed suit. Taking for a personal loan with a low interest rate might assist folks who are still in debt from medical expenses pay it off more quickly. Compare several lenders and rates using an online marketplace such as Credible to find the best fit for your circumstances.
There are several actions that customers may take to ensure that their credit ratings remain in the good range if they are concerned about them. Several of the actions consist of:
Remain within credit limits: Thirty percent of a consumer's credit score is impacted by credit use. Lower credit balances contribute to lower credit use, which raises credit ratings.
Keep open old credit card accounts: A person's credit history considers all of their credit accounts and gives them credit for having had credit for a long time. Credit scores may suffer if credit cards are cancelled since that history is gone.
Apply for credit only when necessary. There is no benefit to opening credit accounts only for the sake of doing so. A consumer's credit will be damaged by too many credit checks since it indicates they don't always utilize credit properly.
Examine credit reports annually or more; since credit reporting companies aren't flawless, mistakes might occasionally show up on a consumer's credit report. Everyone who has a credit score has to analyze and verify their reports to make sure there are no errors.
