Average Credit Scores Worsened For First Time In A Decade, FICO Says

High interest rates and prices are straining household budgets and making consumers less creditworthy.

The average FICO credit score fell to 717 in October from 718 in April, the first time since 2013 that the score has fallen, FICO said Wednesday. People are carrying more debt and missing more payments, which is pushing the average score down. 

“High interest rates and persistent inflation may be starting to weigh on consumers, especially those already struggling to manage their finances,” Can Arkali, senior director of analytic science for FICO, said in a blog post. 

The downtick in the average credit score is the latest of multiple indications that some households—especially more financially vulnerable ones—are struggling under the pressures of the cost of living increases and high interest rates on all kinds of loans.

Inflation that flared up in late 2021 has fallen considerably, but that just means price increases have slowed. Overall prices for the goods and services people buy were 19% higher in January than in February 2020, according to the Consumer Price Index.

To make matters worse, the Federal Reserve has countered that inflation by raising its influential fed funds rate, pushing up interest rates on credit cards, mortgages, and auto loans. Together, those two forces are making it more difficult for some households to make ends meet despite rising wages. Delinquency rates on car loans and credit cards have been rising as more borrowers fall behind on their payments, recent data from the Federal Reserve Bank of New York shows.

The scores, which FICO assigns based on information from the big three credit bureaus, are meant to give lenders an idea of how creditworthy a borrower is, so the national average serves as an indicator of household financial health. The average U.S. credit score had been on an upward trend for nearly 10 years, and has remained firmly in the range considered a “good” credit risk by lenders (670-739).