Financial coach warns Americans’ credit score drop points to ‘uncertain economic times’

FICO recently reported that Americans’ national average credit scores have fallen for the first time in more than a decade, and one expert says this reflects a change in America’s attitude toward personal finance.

Financial coach Jeannie Doherty said: “I’m concerned that this decline highlights the economic uncertainty and lack of personal responsibility people have for their financial futures.” “Your credit score may seem like an arbitrary number, but it has a huge impact on your ability to feel comfortable in the future.”

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, the impact of high interest rates and persistent inflation will weigh heavily on consumers, especially those already struggling to manage their finances,” the report said. This suggests that they may have begun.”

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Several factors indicate consumer stress. Credit card debt and overall household debt are both at record highs, a majority of Americans say they’ve had to make sacrifices to pay their monthly bills in the last year, and delinquencies are on the rise. There is.

Doherty attributed some of the economic stress to the pandemic and some to societal changes. She believes that mental health and spending habits go hand in hand.

The financial coach said Americans traditionally prepare for their first home purchase, manage their credit, and set aside at least a small 401(k) or some form of retirement in their 20s and 30s. He said he was used to it.

But when the pandemic hit, many people were unable to find regular employment and what people thought was “normal” “went out the window,” Doherty said. He also said that many of the financial behaviors of today’s American consumers, such as buying a new car instead of a used one or buying a huge home instead of a more affordable one, are influenced by social and cognitive changes. He argued that this may be due to.

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“A lot of people want to get out,” Dougherty said in an interview with Fox Business. “I’ve seen the Western mindset as, ‘I’m just overwhelmed. I can’t do this. I’m completely traumatized and I’m just overwhelmed.'” I hear that a lot. Now it looks like this. ”

She said that sometimes individuals know they need to improve their credit score, but it is not a priority because they are dealing with their own survival. Many people suffer from what Doherty calls “credit lock-in,” relying on credit cards for daily expenses, accumulating debt without a long-term repayment plan, and often ending up in bankruptcy.

U.S. credit card debt is at an all-time high after falling during the pandemic. (Robert Nickelsburg/Getty Images/Getty Images)

Another problem, she says, is that Americans often think of luxury spending as self-control.

“But part of self-care is loving all parts of yourself, past, present and future,” Daugherty said. “The sooner you start taking care of your future self, the more they will appreciate you, and that starts with your accomplishments” score. ”

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Doherty says her approach to helping clients overcome financial hardships and discouraged mindsets is to say, “No, we’re in this together. Let’s find a way forward. Build a path.” He said his goal was to convey the message, “Let’s do it.”

FOX Business’ Jeffrey Clark contributed to this report.