FICO Scores At All-Time High In The US, But Borrowers Are Not Necessarily Any Richer
16 Jan 2020
Approx Reading time: 2 minutes
- FICO scores in the US stood at an average of 703 in 2019, the highest point in history, according to data released by Experian.
- The data also offered comparative figures from prior years, with FICO scores standing at 701 in 2018, and 689 in 2010.
- Experts believe this increase could have come from new debt to pay off current debt, in addition to better financial management.
It was also revealed that, currently, an estimated 59% of US citizens enjoy a FICO score of greater than 700, which is the highest percentage of the population to have crossed the 700-mark in history.
Generally, a credit score of more than 700 opens doors to a variety of credit options offering great interest rates and services, although someone with a score above 800 might still be eligible for better options.
There are a couple of reasons why credit scores have improved significantly in the past decade, including a reduction in instances of delayed repayments and better credit history on part of millennials. According to reported figures, the average FICO score is maintained by millennials has increased by 25 points compared to 2012.
While a good credit score does indicate improvements in debt servicing behavior on the part of customers, it does not say anything about the total outstanding debt balance in the US that has been on the rise. For example, according to a study conducted by Bankrate, it was found that around 66% of Americans currently owed just as much in credit card debt now as they did ten years earlier.
In fact, people might not be in a better financial position to have improved their credit repayment behavior at all, as indicated by the increased FICO scores. Instead, taking out multiple debt instruments to service currently existing debt instruments can also contribute to an increase in FICO score provided the payments are made on time, even if the total outstanding debt has increased.
However, there are benefits to improving a credit score, especially a reduction in interest payments. According to LendingTree, just by going from a fair to a very good credit rating, Americans can generate savings of around $41,416 on their lifetime mortgage payments.
According to financial experts, this is a great time to be refinancing old debt taken out at higher interest rates, if the credit rating has improved. And that is why many people in America would possibly opt for consolidation or refinancing of their outstanding debt balances.