The Average American Credit Score Hits Record High
Here's some good news: US consumer credit scores reached a record high this spring. The news comes as the result of falling unemployment and continued economic growth, which helped the number of Americans deemed to be the riskiest borrowers to hit a record low. The result of this news? A potential great situation for lending and other economic activity.
According to the Wall Street Journal, the credit scores of many Americans is improving as a result of the amount of time since the recession and housing crisis. So, foreclosures and bankruptcies are disappearing from the credit reports of Americans. In fact, according to a Barclays report, over the next five years, personal bankruptcies will disappear off of more than six million US adults' credit reports.
With credit reports improving by disappearing negative marks, scores have gotten a boost. In April, the average credit score for US adults hit 700, which was up one point from last fall. The new number is the highest average credit score since at least 2005, which is when Fair Isaac Corp., the creator of FICO credit scores, began tracking credit score data. On the other side of the spectrum, the number of US adults with a credit score of below 600 hit a record low — 20% of US adults who have FICO scores. That percentage is down from 20.5% in October and 25.5% in 2010, when the number was its highest.
According to the Federal Reserve Bank of New York, credit card lending is already on the rise. And, with negative marks dropping off reports, scores could increase even more. "We'd see more activity in terms of loan approvals and credit card approvals, more spending and that would have a ripple effect across the economy, increasing aggregate demand for goods and services," said Cris deRitis, senior director at Moody's.
So, with that good news for the American public as a whole, you're probably wondering if your score went up as well. Luckily, there are quite a few ways to check your score for free. If you're a Citi card holder, you'll get free access to your FICO score. Also, Chase, Capital One and Discover all allow everyone to check their credit scores for free, even if you aren't a customer. Understanding how your credit score works is one of the pillars of the points and miles game, and luckily, you can find it out for free in many cases.