Average consumer credit rating hits all-time high

The average consumer’s FICO credit score has risen by eight points to 716 since the start of the coronavirus pandemic, an all-time high, according to Fair Isaac Corp.

The report says that a combination of decreased consumer spending and pandemic-related relief programs may have helped Americans to improve their credit scores by paying off older debts and curtailing any new ones.

The increase in average FICO credit scores was largely driven by consumers who began with a score of less than 600. FICO usually considers a score of between 670 and 739 to be “good”, while anything below 580 is considered to be “poor”.

Consumers with scores below 600 had an average credit score of 581 points in April 2020, but that has now climbed to an average of 601.

Economists warn however that the improvements could be wiped out by rising inflation, which has hit a 31-year high. It means Americans are paying more for groceries, gasoline and other products. It could result in consumers taking on additional debt too.

FICO Chief Executive William Lansing told MarketWatch that inflation by itself will not have a significant impact on people’s credit scores.

“But if prices outstrip income and people win up taking on more debt, that would have an impact on their FICO credit score,” he said. “There’s also a seasonal component – typically in the fourth quarter around holiday time consumers take on more debt, so we could see a modest downtick from that.”

This fall the Consumer Financial Protection Bureau reported that the average renters’ financial condition was improving, despite poor labor market conditions during the pandemic. Renters’ credit scores have risen by an average of 16 basis points since the pandemic began. However, those scores are still way below those of homeowners.

One thing that might help though is Freddie Mac’s recent decision to create a new program aimed at boosting renters’ credit profiles if they’re able to pay the rent on time. The program creates a way for owners and managers of multifamily properties to report on-time rental payments to the three major credit bureaus. At present, it’s said that less than 10% of renters ever see their on-time rental payment history reflected in their credit score.