Despite the overall economic decline, the average FICO® Score in the U.S. climbed 1% (seven points) in 2020, reaching a record score of 710, according to Experian data from Q3 2020. Compared with the average growth seen over the past 10 years, the increase in 2020 is unusually high.
For the past decade, the average FICO® Score has grown at around one point per year. Before 2020, the largest increase in points was a spike of 3.8 points between 2015 and 2016.
In 2020, 69% of Americans had a "good" credit score of 670 or above. That's a 3 percentage point improvement since last year, and shows that the recent growth in scores is helping many Americans move their credit into favorable territory.
"Missed payments reported are down, consumer debt levels are decreasing and the significant steps taken by both the government [with] stimulus spending and private sector [with] lender payment accommodations to help consumers affected by COVID-19 are all contributing to this trend in average score," says Tom Quinn, vice president of scores for FICO.
Looking back, the average credit score has increased in nine of the past 10 years, as consumers have incrementally improved their overall debt management since the Great Recession. And while scores have trended positively, nearly one-third of the growth experienced in the past decade occurred in 2020 alone.
From 2010 to 2020, the average FICO® Score in the U.S. grew by 21 points, or 3.1%, according to Experian data. One-third of that growth—seven points, representing a 1% increase—occurred within the past year, underscoring the magnitude of change recorded in 2020.
As mentioned, much of this growth can likely be attributed to the changes in credit utilization, credit card debt and delinquency rates—all of which have seen improvement since the onset of the pandemic. Though the crisis is not over and all of the final economic impacts have yet to be realized, the initial data indicates that—at least so far—many consumers have managed to insulate their personal credit from the broader economic downturn.
"This has been an extraordinary year for many reasons. From a credit perspective, consumers appear to have done very well despite the pandemic and economic turmoil," says Rod Griffin, Experian's senior director of communication. "However, I think we need to be cautious about whether these numbers will remain strong, or will slide downward as economic stimulus plans and COVID-19-driven payment accommodations expire."
Of the five major factors that impact credit scores, payment history is the most important, accounting for 35% of a person's FICO® Score. Credit utilization, which is the amount of available revolving credit in use compared with credit limits, is the second most important, representing 30% of the score. Updates to these factors can change a credit score, causing it to rise or fall depending on what changes.
In 2020, consumers reduced their cardcredit debt—the most commonly held form of revolving debt—by 14%. This in turn impacted average credit utilization, which dropped 3.5 percentage points, from 28.8% in 2019 to 25.3% in 2020. It's unclear what drove Americans' ability to pay down their credit card debt, but the impact has clearly been reflected in the improvement of the average credit score.
| Snapshot: Consumer Credit Utilization | |||
|---|---|---|---|
| 2019 | 2020 | Change | |
| Avg. credit card debt | $6,194 | $5,313 | -$879 (14%) |
| Avg. credit utilization | 28.8% | 25.3% | -3.5 percentage points (12%) |
Source: Experian
Along with lower credit card debt, consumers have reduced their average number of accounts reported as late (their delinquency rate). Since 2019, the average percentage of accounts 90 to 180 days past due (DPD) dropped by 53%. The percentage of overall accounts that were 30 to 59 DPD decreased by 37%, and the percentage of accounts 60 to 89 DPD declined by 36%, according to Experian data.
Though the decreases in delinquency rates are significant, the underlying percentages of accounts past due are relatively small. In 2019, for example, the percentage of accounts 60 to 89 DPD was just 0.44%. The 36% reduction in 2020 brought that ratio to 0.28%—a large drop, but still a relatively small portion of accounts.
| Snapshot: Payment Delinquency in the U.S. | |||
|---|---|---|---|
| 2019 | 2020 | Change | |
| Avg. % of accounts 30-59 DPD | 0.86% | 0.54% | -37% |
| Avg. % of accounts 60-89 DPD | 0.44% | 0.28% | -36% |
| Avg. % of accounts 90-180 DPD | 1.25% | 0.58% | -53% |
Source: Experian
While identifying a singular reason for the decline in delinquencies is impossible, some of it may be attributable to the way certain debt payments are being reported as a result of COVID-19 legislation.
The Coronavirus Aid, Relief and Economic Security (CARES) Act signed into law in March provided, among other things, a $1,200 one-time payment to many Americans; enhanced unemployment benefits; and provided guidance that urged lenders to grant accommodations to borrowers financially impacted by the pandemic. The law also suspended repayment of federal student loans and included a mandate that mortgage lenders allow some consumers to place their loans into forbearance temporarily.
These efforts may have given consumers impacted by the crisis breathing room, but as relief measures change or expire and the pandemic continues, a trend of increased delinquency could occur.
In past years, average FICO® Score increases overall didn't necessarily mean climbing averages in every state. This changed in 2020, when all 50 states and Washington, D.C., saw their score average increase. Consumers in 25 states saw average scores grow more than the national norm of seven points. The remaining 26 all saw an increase of at least three points on average.