Categories: Economy

US Consumers' FICO Score Hits Highest Since 2005

The COVID-19 pandemic has produced one ray of sunshine amid otherwise devastatingly dark clouds: Consumer credit scores have improved in recent months to the point of hitting a new record high, the Wall Street Journal reported Sunday (Oct. 18).

The widely-used FICO credit score can range from 300 to 850. The average U.S. score in July, according to the Journal, was 711 — up from 708 in April 2020 and 706 in July 2019. WSJ states: "Early estimates suggest the average score has held steady through mid-October at the July level, which is the highest since FICO began keeping track in 2005."

Experts have attributed the improvement in family finances across the country to factors including federal stimulus payments through Aug. 31 and policies that gave borrowers significant leeway as to when to make payments on automobile loans, mortgages and student loans.

Experts also have noted that it's too early to celebrate since credit scores often lag behind changes in families' financial situations.

“First the macro stress occurs, and then it takes a few months for the strain to show up in people’s credit reports,” Ethan Dornhelm, vice president of scores and predictive analytics at FICO, told the Journal. He added that deferment policies and government stimulus checks  “are having a further effect of pushing out that stress for many people.”

Even as they're paying down debt, Americans continue to spend money, data suggests. The U.S. Commerce Department reported Oct. 16 that retail sales in September exceeded those in August 2020 and September 2019.

For many years, consumers have been credited with driving about two-thirds of U.S. gross domestic product. Another gauge of consumer activity, credit card point-of-sale data, also suggests consumers are moving toward pre-COVID-19 spending patterns.

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NEW PYMNTS STUDY: ACCELERATING THE REAL-TIME PAYMENTS DEMAND CURVE – NOVEMBER 2020

About: Accelerating The Real-Time Payments Demand Curve:What Banks Need To Know About What Consumers Want And Need, PYMNTS  examines consumers’ understanding of real-time payments and the methods they use for different types of payments. The report explores consumers’ interest in real-time payments and their willingness to switch to financial institutions that offer such capabilities.