Average FICO Score Hits Record High in 2021

Rachel Morey
Last Update: January 12, 2021 Financial News

Lockdowns across the country prevented many people from eating out in restaurants, shopping in malls, retail stores, and vacation. This could be a contributing factor to the uptick in FICO credit scores. With less opportunity to spend discretionary funds, many Americans were able to pay down debt.

Even though many Americans continue to struggle with the negative financial effects of Coronavirus, FICO scores are on the rise. The average FICO score is now is 711, which is five points higher than last year’s average.

In January 2020, 8.1% of credit files included a 90+ day missed payments during the previous six months. By July 2020, that number was just 7.3%. Consumers that can make loan and credit card payments on time have a better chance of increasing their credit scores. Payment history accounts for 35% of a consumer’s FICO score calculation.

Protect Your FICO Score

If you’ve experienced an increase in your FICO score, now is a great time to make a few changes to keep the momentum. Here are a few things you can do if you are among the many consumers with a rising FICO score.

  • Don’t close revolving credit accounts

Closing a credit card account after paying it off can hurt your FICO credit score by reducing your total available credit. Unless the card has a hefty annual fee or you can’t resist the temptation to run up the balance, leave that account open.

  • Apply for new credit sparingly

When you authorize a “hard pull” of your credit to get a new credit card, your FICO score dips a few points. If you apply for many new credit accounts, your score could drop significantly, limiting your ability to get a loan or credit card in the future.

  • Ask for a credit limit increase

Even if you don’t need more credit, ask your credit card company to increase your limit. This will help boost your score further by increasing your total available credit amount.

  • Make your loan and credit card payments on time

The most effective way to maintain and increase your FICO credit score is to pay your revolving charge accounts like credit cards and store credit accounts on time. Your mortgage company and auto lender also reports to the credit bureaus every month, so when you pay those bills on time, it helps you establish a good payment history.

Consider Debt Consolidation

If you have high-interest debt and are interested in bringing your credit card balances to zero, a debt consolidation loan may be the answer. With a consolidation loan, you’ll borrow enough money to pay off your debts. Within a few months, your credit file will show that your credit card accounts are paid off, which will help boost your score.

Your new consolidation loan will also show up on your credit reports, which may decrease your score by a few points. You could see your FICO scores go up, however. Sometimes adding a new loan will improve your mix of credit types, one of the five main factors that make up your FICO credit score.

Get a Free Instant Credit Score Boost from Experian

Experian Boost offers consumers a free score boost if you can link your bank account to their platform. The Experian Boost algorithms search for transactions associated with utility companies, cell phone providers, and rent payments. They consider that information when calculating your credit score.

Ask for Help if You Face Financial Problems

It often takes a few months for financial problems to cause missed mortgage payments or late credit card payments. While consumer debt is decreasing overall, many families face financial hardship due to job loss, illness, and small businesses’ closing. If you are struggling financially, contact your lenders and try to work out a deferment or forbearance agreement.

If your lender indicates that you have been “affected by the disaster” and that you are participating in a forbearance or deferment program, it won’t hurt your FICO credit scores.

Millions of consumers are currently getting help from their lenders due to financial problems caused by Coronavirus. Many lenders have simple programs in place to help their customers stay current on their bills.

MEET THE AUTHOR

Rachel Morey

Rachel Morey is a journalist specializing in automotive, insurance, and finance content. She has been writing professionally for nearly a decade and has projects in print and broadcasting. A native Iowan, Rachel as a special fondness for the open roads of rural America.

Recommended Articles

Debt

Credit Card Debt Drops for The First Time in 8 Years

EPF December 30, 2020

Despite the current recession, consumers have paid off more than $73 billion in credit card debt during 2020. This is the first time overall credit card debt has decreased since 2013. Since 2014, all debt (mortgage balances, auto loans, personal...

Debt

Average FICO Score Hits Record High in 2021

EPF December 27, 2020

Lockdowns across the country prevented many people from eating out in restaurants, shopping in malls, retail stores, and vacation. This could be a contributing factor to the uptick in FICO credit scores. With less opportunity to spend discretionary funds, many...

AS SEEN ON