A recent report from FICO found that credit scores have dropped for the first time in a decade as consumers struggle to pay their bills on time and save money.
“This is a remarkable milestone,” said Ethan Dornhelm, FICO’s vice president of scores and predictive analytics, according to CNBC. “This is the first time in over 10 years that the score has gone down.”
“Another possible contributing factor is that savings rates are trending back to zero, wiping out the savings cushion that many consumers had,” Dornhelm said.
FICO’s March blog revealed that “the national average FICO® score remained stable at 718 from April 2023 to July 2023.” However, the national average credit score fell by one point to 717, according to credit score data through October 2023.
“Given that FICO scores are a lagging rather than a leading economic indicator, this means that the effects of high interest rates and persistent inflation will begin to weigh on consumers, especially those already struggling to manage their finances. This suggests that there may be,” the report states. .
FICO also noted that “borrower missed payments” and increased “consumer debt levels” are contributing to the decline in Americans’ credit scores.
“Because we are so far removed from pandemic-level relief programs, consumers are extremely faced with paying off their credit obligations with little access to stimulus or government-mandated relief programs.” Dornhelm said in response to the report. .
A new survey released Thursday by Assurance IQ shows that 66% of U.S. adults confirmed in a December survey that they had made sacrifices to pay for their expenses in the past 12 months, and that they used a variety of Analyzed tactics.
Researchers surveyed 5,000 people, the majority of whom earned an annual income of $75,000 or more, and found that borrowing money is the most common way Americans cover living expenses when they’re low on cash. or using a credit card (41%).
Unsurprisingly, low-income households have been hardest hit, with those earning less than $75,000 more likely to borrow money for expenses, with 47% saying they needed to borrow in the last year. .
Fox Business’ Breck Dumas contributed to this report.
