Consumers in the U.S. have seen their credit scores reach record highs in the spring at the same time that the number of Americans who have the riskiest credit profile hit a record low.
What’s more, the recession and housing collapse are a few years behind us, helping improving the balance sheets of a slew of Americans. The report noted that those foreclosures and bankruptcies are now off those credit reports. Over the next five years, more than six million adults in the U.S. will see their personal bankruptcies disappear from the credit scores, said the WSJ, citing recent data from Barclays.
“Higher scores lead to more available credit,” Cristian deRitis, senior director in the economics group at Moody’s Analytics, said in WSJ’s report. “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.”
According to the report, the average credit score around the country reached 700 in April, which is a one point increase from last fall. Fair Isaac Corp. said it marked the highest average credit score for the nation since at least 2005. The share of consumers who are viewed as the riskiest from a credit perspective reached a new low of about 40 million — or 20 percent of adults in the U.S. that have FICO scores.
Fair Isaac said that’s down from 20.5 percent in October and a peak of 25.5 percent back in 2010. The paper noted that in an environment where credit scores are rising, banks and lenders are likely to lend more money — and at a lower cost to the borrower.