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The Average Credit Score Hit a Record High of 711 Despite Covid-19 Pandemic

By: David Bach  |  Last Updated: October 22, 2020
Financial Expert & 10x New York Times Bestseller
IN THIS ARTICLEWhy did FICO scores increase during the pandemic?
What is a FICO credit score?
How do I find my credit score?
How do I improve my credit score?

The Covid-19 pandemic has rocked the U.S. economy, leaving tens of millions of Americans unemployed and struggling to make ends meet. 

Still, the average FICO credit score — the most widely used credit scoring model, which was created by data analytics company Fair Isaac Corporation about 30 years ago — hit a record-high of 711 this July, up from 708 in April. And that high average likely held steady through mid-October, Fair Isaac Corp. estimates.

Why did FICO scores increase during the pandemic?

A credit score is a three-digit number that typically ranges from 300 to 850 and is meant to reflect the likelihood you will pay your bills on time (we’ll dive into the details later on). You would think that scores would actually decrease during a recession, but a few factors help explain the increase.

For starters, FICO scores are usually lagging indicators — meaning, there’s typically a delay between when a macro stress event occurs, like a recession, and when the strain starts to reveal itself in credit scores.

If you look at the last major downturn, the Great Recession, credit scores didn’t reach their lowest point (686) until late 2009, months after the recession officially ended.

Plus, funding from the government (in the form of stimulus checks and expanded unemployment benefits) and assistance from lenders (payment pauses on mortgages, auto loans and student loans), have helped many borrowers stay on their feet and keep up with bills. Being able to pay your bills on time is extremely influential on your FICO credit score — it represents 35% of your overall score.

Credit card debt has also been steadily dropping since March. Heading into 2020, Americans owed over $1 trillion in credit card debt. This summer, after reducing spending amid the pandemic and using stimulus money to help pay down debt, Americans managed to put a $99.5 billion dent in that total and now owe less than $1 trillion for the first time since 2017.

Of course, there’s no guarantee that scores will hold steady around 711 or continue to increase. If Congress doesn’t reach a deal on another stimulus package, that could mean “real damage to credit reports” within a couple months, Francis Creighton, chief executive of the Consumer Data Industry Association, told the Wall Street Journal. After all, just like your finances, your credit score changes all the time.

What is a FICO credit score?

Your credit score is a three-digit number that typically ranges from 300 to 850. It’s meant to give lenders (think: banks providing mortgages, credit card companies or car dealerships financing auto purchases) an idea of your ability to handle credit and repay loans. 

A good score means you’re a safe person to lend money to. A bad one means you may be too risky. Lenders use your score to decide whether they should loan you money and, if so, how much interest they should charge you.

There are many types of credit scores. The most widely used rating is the FICO score, created by the Fair Isaac Corporation, but there’s also VantageScore, which has been gaining market share since the big three credit bureaus (Experian, Equifax and TransUnion) created it in 2006. There may be slight variations between your scores, but they probably won’t be wildly different. In general, if you have a great FICO Score, chances are you’ll also have a great VantageScore — and vice versa.

Your credit score depends on five main factors, including your payment history (your track record of paying your credit accounts) and credit utilization (the proportion of your total available credit being used).

In terms of what’s considered a good or bad score, here are the five FICO score ranges, according to Experian:

Very Poor: 300-579
Fair: 580-669
Good: 670-739
Very Good: 740-799
Exceptional: 800-850

That means, the average American, with a score of 711, has good credit.

How do I find my credit score?

Most credit card issuers provide credit scores to their customers for free. Some provide free FICO scores, while others provide free VantageScores. Log on to your credit card’s site to find yours — if you can’t find it, call the company and ask if they have it.

You can also check with your bank or loan company. Your score may be on your bank or loan statement, or you may be able to find it online by logging into your account. Or, you can check your score through free sites like Credit Karma, Experian or Discover Credit Scorecard.

How do I improve my credit score?

If your score has been negatively impacted recently, don’t stress. Raising your score isn’t that hard if you know what to do. If you haven’t seen an impact on your score, you should still read on so you know how to protect yourself in the future. 

Here are five quick tips to improve your score:

1. Get your credit report and check it for errors

So you know your credit score, but now I want you to pull your credit report. Your credit report is a more comprehensive record of your credit and breaks down exactly what is actually affecting your credit score. It’ll show if you have a history of late payments, if you’re using too much credit or if you have any other suspicious financial activity.

It’s critical to look through your report and make sure there are no mistakes that are hurting your score. And right now, it’s easier than ever to check your credit: The three national credit reporting agencies (Equifax, Experian and TransUnion) are offering free weekly credit reports through April 2021. Go to www.annualcreditreport.com for your free report and comb through it for any errors that could be damaging, like late payments that were actually paid on time or credit limits that are lower than they should be. 

If there are errors, you’ll have to send a certified letter to the credit agency, which will be required to correct inaccurate or incomplete information in your report within 30 days after it’s pointed out to them.

2. Automate your bills so you never miss a deadline

Missing payments, even just one, can really hurt your credit score, so I want you to set up autopay on all of your bills, including rent or mortgage payments, utilities, internet, phone bill, car payments and credit card bills.

(If you have missed payments, make them as soon as possible. It’s never too late to clean up your act. Get yourself current as quickly as you can and then stay current!)

3. Keep your balance well below your credit limit

Of all the factors you can control and improve quickly, how much you owe is probably the most powerful. It’s important to know what your credit limit is — then, keep your usage below 30% of your available credit.

For example, if your credit limit is $10,000, you want to keep your balance below $3,000 at all times. Anything over that and your credit utilization is getting too high.

4. If you rack up high balances, pay your credit card bill early

The “amounts owed” part of your credit score (which represents 30% of your total FICO score) is based on the balance due listed on your most recent credit card statements. So even if you pay your bills in full each month, running up high balances can still hurt your score. You can avoid this problem by paying down all of, or part of, your bill before the end of your statement period, thus reducing the balance due that will be reported to the credit bureaus.

5. Hang on to your old accounts, even if you’re not using them

Part of your credit score is based on how long you’ve had credit accounts. Closing old accounts shortens your credit history and reduces your total credit — neither of which is good for your credit score. If you have to close an account, close a relatively new one and keep the older ones open.

Keep in mind that closing an account will not remove a bad payment record from your report. Closed accounts are listed right along with active ones.

For more tips, check out my complete 11-step guide to raising your credit score.

Check out my top recommendations for credit monitoring companies

Read next: David’s 11 Money Tips to Start Living Rich Today