Americans’ Credit Scores Are Falling for the First Time in a Decade

Posted on April 5, 2024 at 11:53am by

For the first time in nearly a decade, the national average FICO score has decreased, signaling that many Americans are experiencing some level of financial stress during a time of inflation and high interest rates. This drop has occurred despite historically low unemployment rates and as fears of recession fade.

In October 2023, FICO released data showing the national average FICO score came in at 717, down from 718 in July. FICO shared that this recent one-point drop was a result of an increase in missed payments and rising debt levels for borrowers. While this average score remains near record high, and is above pre-pandemic levels, this marks the first decrease since October 2013, when scores fell by two points from April.

“The effects of high interest rates and persistent inflation may be starting to weigh on consumers, especially those already struggling to manage their finances,” said Can Arkali, FICO’s senior director of scores and predictive analytics, in an article from CNN. Arkali told CNN that this drop should be watched closely in upcoming quarters, but it is not necessarily an immediate red flag.

However, this decrease in credit scores is not the only recent sign of financial distress for Americans.

In December, U.S. credit card debt surpassed a record high of $1.1 trillion, with over 18% of the population having a payment that was 30 days or more past due on at least one account in the past year. Although most of these missed payments stem from credit cards, missed payments have now surpassed pre-pandemic levels, while mortgage and car loan missed payments still remain below pre-pandemic levels.

With higher costs of living and inflation causing many to take on higher debt burdens through credit cards and personal loans, consumers are clearly experiencing more financial stress and missing their monthly payments more often. For those experiencing uncertainty because of increased debt burdens, bankruptcy may be an option to help you on your path to a more secure financial future. Contact a member of our team at Sader Law Firm today at (816) 561-1818 for a free phone consultation and information on what options will work best for you.