Why Has the Average Credit Score Gone Up?

The average U.S. credit score has gone up recently, but not by much. Of course, the way those figures change year over year depend on the model you’re looking at, considering there are so many different credit scores out there.

Based on numbers FICO provided, the average hit a low of 686 in October 2009, but it was up to 690 in October 2013, the most recent year-over-year data available. Experian provided more limited data on VantageScore 3.0, showing that the score went up in the last year (from 664 in 2013 to 666 in 2014), but the most recent average is still well below pre-crisis levels for the scoring model (679 in 2007) and where it was in the peak of the recession (667 in 2010).

Despite the varying figures, experts from FICO and Experian said the same thing: Consumers’ credit took a hit as a result of economic downturn, but things are turning around. The fact that the average is no longer declining is significant.

“It was a very dismal economic era there for a while and people had no confidence,” said Rod Griffin, Experian’s Director of Public Education. “I think improving scores tells us that people are much more confident in their economic situation.”

Looking at the distribution of those credit scores show progress, as well. There’s a smaller percentage of consumers with the worst scores (300-499) now than there was during the downturn, FICO’s data shows. Even though that deep subprime segment of consumers has consistently been the smallest, it grew a little in 2008 and 2009, peaking at 7.3% of consumers in April 2009, but it fell to 5.4% by April 2014.

On the other end of the spectrum, consumers with the highest credit scores consistently made up one of the largest groups throughout the downturn. Throughout 2008, 2009 and 2010, consumers with scores between 800 and 850 made up between 17.9% and 18.7% of scoreable consumers (it fluctuated), and as of April 2014, it was the largest group, with 19.3% of consumers.

“Fewer and fewer consumers are stretched to make their payments,” said Ethan Dornhelm, principal scientist of the Scores Development Group at FICO. Dornhelm said there was some concern about consumers sliding back into bad credit habits as the hardships of economic downturn faded with time, but that doesn’t seem to be the case.

“As of thus far, consumers are continuing to exercise caution and restraint,” he said.

On a personal level, your credit score will fluctuate, but as long as you consistently practice good debt management, like making payments on time, keeping outstanding balances low and sparingly applying for new credit, your credit history should continue to gain strength. You can check your progress by getting your free credit scores every month on Credit.com.