FICO scores hit record-high


Americans’ FICO scores hit record-high average

BOSTON – Oct. 1, 2018 – 704! That’s the new, record-high average FICO credit score among millions of Americans, and it’s positive news for homebuyers, sellers, lenders and the economy overall.

FICO scores predict the probability that a borrower will default on a loan. They run from 300 – indicating that the individual is extremely high risk – to 850, meaning almost no risk of default. A score of 704 is considered good and, along with other favorable factors in your application, will help get you approved for a mortgage – though not necessarily at the lowest interest rate and fees available.

A score of 750 will get you primo rates and terms but a 450 will probably get your application tossed. In the mortgage arena, FICO scores are used by virtually all lenders and are the only scores that mega-investors Fannie Mae and Freddie Mac accept. They are also used extensively for credit card, auto loan and other loan applications.

A few noteworthy trends jump out of FICO’s latest data on Americans’ scores:

  • Age matters. Young people age 18 to 29 tend to have lower scores than other age groups – they score an average 659. Part of the reason might be that many of them have “thin” files with relatively few credit accounts or transactions. When they fail to make payments or pay late on a credit card, the event weighs more heavily on their score than it would if they had longer histories. The average score for people ages 40 to 49 is 690 and, for seniors 60 and older, it’s 747.
  • Fewer people are hobbled with collection accounts. When you don’t pay back what you borrowed, your lender might hire third-party collectors. That gets reported to the credit bureaus and can depress your FICO score for years. Twenty-eight percent of all Americans had collection accounts on their credit files in 2015; today, it’s just 23 percent.
  • Rock-bottom FICO scores are fewer. In 2009, 7.3 percent of American consumers had terrible scores, ranging between 300 and 499. Now that’s down to 4.2 percent. In 2009, 8.7 percent of consumers scored between 500 and 549; today, it’s down to 6.8 percent. Overall, fewer Americans now have FICO scores below 650. In 2009, 35 percent scored 649 or less; today, it’s 28.7 percent.