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One Pandemic Perk? Credit Scores Reach All-Time High

Relief programs and slower consumer spending boosted the average credit score 8 points, to 716, putting homeownership within reach for more buyers.

WASHINGTON – Since the beginning of the pandemic, the average FICO credit score increased by eight points to reach 716, according to Fair Isaac Corp. Pandemic-related relief programs and decreased consumer spending early in the pandemic may have helped Americans improve credit histories if they paid down existing debts and curtailed new debt.

The increase has largely been driven by consumers who had a credit score below 600. FICO usually considers a score between 670 to 739 to be good; anything below 580 is considered poor.

Consumers in that category averaged a 581 credit score in April 2020. One year later, those scores had climbed to an average of 601.

But economists warn that improvements could be wiped away with an increase in inflation, which is now at a 31-year high. Americans are paying more for groceries, gasoline and products. That could lead to more consumers taking on debt, too.

Still, “inflation by itself … is not going to have a significant impact on the overall national credit score,” says William Lansing, CEO of FICO, to MarketWatch. “But if prices outstrip income and people wind up taking on more debt – that obviously would have an impact on their FICO credit score. 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.”

Earlier this fall, the Consumer Financial Protection Bureau reported that renters’ financial conditions were improving despite poor labor market conditions. Renters’ credit scores increased by 16 points during the pandemic. However, those scores still remain substantially below those of homeowners.

Renters could soon get another credit score boost: Freddie Mac and Fannie Mae both announced new programs to help renters build their credit profiles by providing a means for owners or managers of multifamily properties to report on-time rental payments to the three major credit bureaus. Currently, less than 10% of renters see their on-time rental payment history reflected in their credit scores.

Source: “Credit Scores Hit an All-Time High During the Pandemic – Will Inflation Bring Them Down? FICO’s CEO Weighs In,” (Nov. 18, 2021); Consumer Financial Protection Bureau

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