Credit Scores in America Reach Record High
New data from FICO shows the average credit score in America is now 700, according to The Wall Street Journal. That is the highest average score since the company started tracking credit scores in 2005, indicating a positive upturn in the country’s spending and lending habits.
FICO also discovered that the number of high-risk consumers is at a record low. Approximately 40 million adults have credit scores below 600, representing 20% of all FICO score holders. In 2010, 25.5% of FICO holders were high-risk, mostly due to the recession.
With higher average credit scores, consumers have more lending opportunities and lower interest rates. Low interest rates lead to lower, more affordable monthly payments, which means consumers have a better chance at paying off their loans and credit cards in a timely manner. This is a positive cycle that could do wonders for America’s economy moving forward.
Many consumers will continue to see improvements in their credit scores because their personal bankruptcies and mortgage foreclosures will fall off their credit reports. These events stay on a person’s credit for 7-10 years. In 2010 alone, there were 1.1 million Chapter 7 bankruptcies, 435,000 Chapter 13 bankruptcies and 1.8 million foreclosures. This does not include the filings from 2007-2009. Millions of Americans will get a fresh start on their credit between now and 2020.