Record-breaking figures, the boom in US GDP and homeownership are on the rise month after month. Despite these examples of economic volatility in 2020, one more surprising finding has emerged: The United States has now hit an average credit score.
Experian’s latest consumer credit analysis highlights emerging credit trends. Not only does the pressure on credit quality change between generational groups and the location of the consumer, but it is clear that Americans are focused on paying specific types of debt, leading to an overall improvement in the score.
69% of Americans have a credit score of 670 or higher
This average credit score stands out because the percentage reached just 66% last year and then jumped three percentage points in a year. The average US credit score for 2020 is 710, which is also significantly higher than the previous year.
In 2019, the mean score for Americans was 703. This growth rate is extraordinarily high compared to observations from the past decade, where FICO scores only increase by about one percentage point per year.
With the rise in credit scores, more and more Americans are coming within reach of FICO’s ‘good’ credit score. If the credit score falls between 670 and 739, there are more credit options for borrowers, and consumers in the range are eligible for most credit cards and loans. According to Rod Griffin, senior director of education and consumer protection at Experian, there are promising signs of how consumers are managing their credit history, despite the dire financial situations that sparked the pandemic.
“Credit scores have continued to improve, a trend we’ve seen over the past decade, with an average score of 688. This has supported this rise in scores,” Griffin added.
An average credit score in each state
Not only has the average credit score gone up, but trends appear to be popping up in some states. For example, the major states in the country with the greatest increase in total lending were Arizona, Delaware, Idaho, North Carolina, and Washington DC. These states are up 9 or 10 points on average in 2019.
On the other hand, North Dakota, South Dakota, Hawaii, Nebraska, and Vermont had the lowest average credit increases from 2019 to 2020. But what’s remarkable about these states is that they initially had above-average credit scores. there was therefore less room for an increase. But in general, there is an upward trend in lending in America, regardless of location. Average credit card debt decreases by 14%
Credit scores aren’t the only numbers showing interesting trends. Overall, the average consumer debt in the United States fell 14%, even during an economic downturn. Credit usage also fell by 3.5%. This means that Americans not only pay off credit card balances but the credit for each individual decreases.
As Americans pay off their credit card balances and reduce credit consumption, the value of credit increases. Balances and usage are two main factors used to calculate the FICO credit score.
It may seem strange that credit card debt is declining due to high unemployment rates and unemployment insurance claims. But with federal student loan payments and rising interest rates due to violations of the CARES 2020 law, it appears that debt payments have shifted to credit cards rather than student loans.
If you look specifically at federal student loans only, the loans have stayed the same or increased from 2019 to 2020, depending on the type of loan. Federal and private student loans appear in consumer credit reports, but credit card balance will decline in 2020, not student loans.
Credit scores improved the most among millennials
Just as location affects the number of higher credits, it seems that age is also a factor. Looking at the averages, it is clear how the rise in credit scores differs between generations.
• Millennials (24-39 years old) increased their average FICO score by +11 between 2019 and 2020.
Generation X (age 40-55) increased the mean FICO score by +10 points.
• Generation Z (18-23 years old) increases the score by +7 points.
While the baby boomers (56-74 years) and the quiet generation (over 75) have increased by +5 and +1, these numbers indicate that America as a whole is getting more credit, regardless of age.
The millennial generation continued to improve its credit. In 2019, they had an average credit score of 647. It rose to 658 in 2020. While still below the 688 average, responsible credit habits, including fewer payments and lower short balances, are helping the Millennials change their credit score. in a positive direction. . This trend should encourage the millennial generation and all consumers to be proactive in protecting and maintaining their credit history, ”explains Griffin.