The national average FICO credit score is seeing an unprecedented decline

National average in accordance with Money Talks News FICO credit scores experienced their first decline in a decade, signaling potential economic challenges. According to Fair Isaac Corp. (FICO), the average credit score dropped to 717 from 850 in October 2023, down one point from the previous 12 months. This departure from the same old upward trend, last seen in 2013, has caught the eye of monetary analysts.

FICO highlights the dynamic nature of credit scores, attributing this decline to the combined impact of inflation and better rates of interest adversely affecting consumers. It appears that borrower defaults and escalating consumer debt levels are contributing significantly to this modification.

Statistics from October 2023 show a disturbing trend: roughly 18% of the population was not less than 30 days delinquent on not less than one credit account within the previous 12 months. This represents a pointy increase from the 4% recorded in April 2023. Higher consumer debt is evident in the rise in average credit utilization, which reached 35% in October 2023 in comparison with 34% in October 2019, just before the pandemic hit Covid-19 pandemic.

Worryingly, credit card balances within the United States topped $1 trillion in October, averaging about $3,100 per person. The consequences for consumers of deteriorating creditworthiness, especially within the face of economic uncertainty, are profound. Analysts suggest the change could prompt lenders to reassess risk, potentially resulting in changes in rates of interest and loan approvals.

To address the impact in your individual credit score, experts recommend taking proactive steps. Understanding how your credit score is calculated is crucial since the dominant aspects are your payment history and amounts owed. Repayment history, which makes up 35% of your FICO score, highlights the importance of constructing timely payments on credit cards, installment loans, and mortgages. Even a single late payment can have opposed effects, making it essential to keep up a consistent history of on-time payments.

“Outstanding amounts,” which include outstanding balances on installment loans and revolving accounts akin to credit cards, are essential in assessing your creditworthiness. The credit utilization ratio, which indicates the portion of obtainable credit used, is a key metric. Experts advise against closing unused credit card accounts since it reduces your available credit, thereby increasing your credit utilization ratio and potentially hurting your credit score.

As the nation grapples with an unexpected decline in average credit scores, residents are encouraged to evaluate their creditworthiness, understand the aspects affecting their scores and take proactive steps to keep up or improve their credit score.