Surprising News About Your Credit Score

What's happening with your credit score?

Credit scores, on average, are the same now as they were five years ago before the recession.

Some unexpected news came in today from FICO, the company whose name is synonymous with your credit. What was the news? That the financial crisis, the recession, the housing bust, and the foreclosures and layoffs we’ve been feeling these past few years have done almost nothing to country’s credit scores.

According to information released last week by FICO, the average credit score stood at 690 in April. That number is in line with both last year’s average score and the average in 2007. That number in 2007? Americans had an average credit score of 689 five years ago.

This news comes after months of reports, both in the media and on industry blogs, that the recession was hurting, even lowering credit scores for millions of Americans. There are events that typically lower your FICO score, such as having a home that goes into foreclosure (since 2007, this has happened to nearly nine million homes) or going into personal bankruptcy (over six million people have filed since 2007). Foreclosure and bankruptcy usually result in a drop of almost 200 points from your credit score. So how can the FICO score seem unaffected by the millions of people who have gone into foreclosure or bankruptcy?

According to FICO, there are approximately 200 million U.S. consumers with a FICO score. So, in order for the average score to change more noticeably, a much larger number of consumers on one end need to be affected (this comes from, the consumer division of the company).

Also, optimism among lenders appears to be growing. In April of this year FICO conducted a survey of lenders showed that there is an expectation for delinquencies in mortgage payments, small business loan payments, and car loan payments to be lower than last year. Even credit card delinquencies were expected to improve from the last quarter.

Supporting this optimism is data released today by S&P Dow Jones Indices and Experian for the S&P/Experian Consumer Credit Default Indices, a comprehensive measure of changes in consumer credit defaults. This data shows that most loan types saw a decrease in default rates, and many for the sixth consecutive month. Four loan types posted their lowest rates since the end of the 2007/2009 recession.

“There is only positive news in June’s numbers. In the past three years, households have come a long way in repairing their balance sheets. Looking across our 10 headline indices, only one — bank cards — shows default rates above 2.5 percent and even those are close to their eight year historic low,” said David M. Blitzer, Managing Director and Chairman of the Index Committee for S&P Dow Jones Indices.

On a less scientific measurement, AmOne has noticed the exact same trend. As a leader in all areas of money and a specialist in unsecured business and personal loans, AmOne hasn’t witnessed a noticeable decrease in the credit worthiness of people using our free loan matching service. To the contrary, we’ve seen just the opposite. AmOne has noticed a steady growing over the past few years of new unsecured loans being offered to its users.

Whatever your outlook on America’s current economy, you should view this news as all positive. If Americans are retaining their credit scores, then they must be still paying down their obligations each month. If there is anything the downturn in today’s economy has taught us, it’s to be more financially smart which, in the short term and the long term, is always a good thing.

The Takeaway

Unfortunately, being financially smart means more than simply paying your bills on time. You need to be able to budget your money, to spend it wisely, and to save where you can so you can afford to keep up with your obligations. But what if something happens and you don’t have the money available? AmOne can help you find the right financial solutions for your needs. Our knowledgeable associates are ready answer your questions on finance, personal loans, debt consolidation, and more. AmOne offers solutions; your call to us is free and we won’t try to sell you anything. Find out how to reach us and learn more about how AmOne can help you today.