For the second year running, the national average credit score has dropped, according to FICO, the company behind one of the most widely used credit scoring models in the U.S. The average score now sits at 715, down from 717 in 2024 and 718 in 2023. FICO scores range from 300 to 850, and while a few points may seem insignificant, the trend is raising concerns among financial experts.
High Interest Rates and Economic Strain Impact Credit Scores
The decline in credit scores comes as no surprise to Matt Schulz, chief credit analyst at LendingTree, who notes that millions of Americans are facing significant financial pressure. “With stubborn inflation, high interest rates, a tough job market, and overall economic uncertainty, it’s no wonder credit scores are slipping. Tough times often force tough decisions,” Schulz says.
Consumers are sinking deeper into debt, particularly when it comes to credit card balances. FICO’s recent report reveals a sharp increase in credit card debt, coupled with a rise in missed payments—both of which contribute to the decline in average scores.
The Impact of Student Loan Delinquencies
One of the most significant factors behind the drop in credit scores is the resumption of federal student loan delinquency reporting. During the pandemic, borrowers were given a forbearance period, meaning their loans were temporarily considered “current,” and delinquencies were not reported. This helped boost credit scores for many student loan borrowers.
However, since the forbearance ended in September 2024, the resumption of delinquency reporting has led to a spike in the number of severe delinquencies, pushing scores lower for millions of borrowers. According to a March report from the Federal Reserve Bank of New York, borrowers who are behind on their student loan payments could experience “significant drops” in their credit scores. This is especially concerning given that 9 million student loan borrowers are expected to face such declines.
Tommy Lee, senior director of scores and predictive analytics at FICO, suggests that delinquency rates may continue to rise in the coming months due to changes in income-driven repayment plans.
Economic Recovery: A “K-Shaped” Trend
The economic recovery has been uneven, with some consumers benefiting from gains in the stock market and appreciating home prices, while others have been left struggling. FICO’s report shows that while the national average credit score has decreased, more consumers are now falling into both the highest and lowest credit score brackets. “While the average score is down, there are consumers who have benefited from the recent highs in the stock and real estate markets,” says Lee. “These individuals have seen their financial positions improve.”
What You Can Do to Improve Your Credit Score
For those facing lower credit scores—whether due to rising debt, missed payments, or student loan delinquencies—there are several strategies to boost your score. FICO’s Lee emphasizes that credit scores are dynamic and can improve with the right steps.
Some key actions to improve your credit score include:
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Paying your bills on time: Consistently making on-time payments is crucial for improving your score.
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Limit credit applications: Only apply for credit when necessary to avoid unnecessary credit inquiries that can impact your score.
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Keep credit utilization low: Try to maintain your credit utilization rate (the ratio of debt to total available credit) below 30% to prevent high balances from negatively affecting your score.
LendingTree’s analysis also highlights the significant financial impact of improving your credit score. Moving from a “fair” score (580-669) to a “very good” score (740-799) could save you more than $39,000 over the life of your loans, with the largest savings coming from lower mortgage costs, followed by better rates on credit cards, auto loans, and personal loans.
“There’s very little in life that’s more expensive than having poor credit,” Schulz warns. “It can cost you tens of thousands of dollars over the years in fees and interest.”
