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Consumers’ FICO scores on the rise

Repairing credit takes work, but there are ways it can be done

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Consumers are getting better at handling finances, if one’s to believe Experian’s 2019 Consumer Credit Review.

The U.S. economy has been put through its paces in the last two years, but it never completely fell off the cliff. With no fevered financial brow to wipe, consumers showed their appreciation with record holiday spending in 2019, buying billions of products and signing up for millions of Prime accounts at Amazon as an example.

“While it's difficult to predict whether the economy will see continued growth this year, we can look back at 2019 to examine consumer credit behavior for clues on how Americans have responded to economic trends,” theorized Experian’s Matt Tatham, manager of content insights and data analyst at Experian Consumer Services. “The data also can reveal how consumers have rebounded from the Great Recession of 10 years ago and what their path might be going forward.”

Most consumers have FICO scores of 700+

While a FICO score of 850 is still the holy grail, scores of 700+ are considered good, and the report says there’s lots of consumers who are at that level. Tatham says that having 59 percent of consumers with that score is “the biggest percentage ever seen at that level.” 

"Americans are making better credit decisions, reflected by the 703 average FICO Score in 2019, which is an indication of consumers being more educated on their credit,” says Shannon Lois, Experian's head of analytics, consulting and operations. "Late-payment rates have decreased for several credit products this past decade. Credit card balances saw moderate growth over time along with overall consumer debt signaling healthy credit behavior that provides confidence to lenders."

Millennials improving their credit

While millennials might be perceived as a quagmire of financial responsibility, they’re the ones who should be thanked for pushing the average credit score up.

“Millennials ... are finally hitting their credit stride. Their economic emergence is reflected by a 25-point increase in average FICO Score since 2012 (the earliest available Experian data)—the biggest increase of any generation,” found Experian. 

“With an average FICO Score of 668, millennials' improving credit shows opportunity for reaching an average in the "good" FICO Score range if growth trends continue.”

42 states upped their average FICO Score

The report said that, since 2018, 42 states have shown improved average FICO Scores. Minnesota led the way on the back of a seven point increase, more than double its partners in the Top 5 -- South Dakota, North Dakota, Vermont and Wisconsin. 

Michigan and Nevada residents are worthy of a shout-out. They proved they were becoming more financially trustworthy, evidenced by having the largest increase of any other state over five years, at 13 points.

And the rest of the country? Nine states showed no change at all in their average score and 34 had an average score of 700 or higher, which is in par with what those states the year before. Over the past five years, 10 states improved their average credit scores by 10 or more points. 

Want a good credit score? Rub shoulders with the folks in Boulder

Among U.S. metro areas, Boulder, Colorado kept hold of the number one position on city-to-city basis. It had the highest average FICO Score in 2019 at 743 -- 40 points higher than the national average.

Overall, 78 percent of U.S. metro areas saw their average FICO Scores increase in 2019. That includes 60 percent of metro areas with a FICO Score average of 700 or higher, 7 percentage points higher than in 2018. Nine metro areas improved their FICO Score average to move into the coveted 700-and-higher score range.

Minnesota and Wisconsin can thank their homies in Rochester and Madison for pulling their weight. Compared to the other Top 50 Metros, those cities were in a dead heat for second place with average scores of 740.

By the way, do you know what a FICO score is?

FICO’s origins go back to 1956 and comes from Bill Fair and Earl Isaac, who met when they worked at the Stanford Research Institute. The two took their last names and turned them into “FICO” for the “Fair Isaac Corporation.” 

Little by little, FICO has grown into a consumer’s best friend or worst nightmare. The company’s metrics are used by 90 percent of the lending community.

Credit scores are tricky little devils. ConsumerAffairs has produced a guide both on credit scores and credit reporting sites. If you’re a consumer who’d like to improve their credit score, it might be worth your time to look further into what we found.

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