Average American FICO Credit Score in 2020

As of 2020, the average credit score in the U.S. is 703 based on the FICO score model [1] What Is the Average Credit Score in America? https://wallethub.com/edu/cs/average-credit-scores/25578/#:~:text=The%20average%20credit%20score%20in%20the%20U.S.%20is%20680%20based,%2Dto%2Dgood%20credit%20score..

Consequently, the average American has what is considered good credit. Credit scores from all three credit reporting agencies (Experian, Equifax, and TransUnion) show that Americans have been doing well at paying their bills and handling money responsibly.

Your credit score is important and can have an enormous impact on your life. It can determine living arrangements (leases and mortgages), driving (car loans and leases), and communications (cell phone financing). Understanding your credit score and the factors that make it rise or fall is critically important.

Key Statistics

Contents

Average Credit Score Over Time

Year Credit Score
2005 688
2006 690
2007 689
2008 689
2009 686
2010 687
2011 689
2012 689
2013 690
2014 694
2015 696
2016 699
2017 701
2018 705
2019 706
2020 703

Sources [15] Average US FICO Score Ticks Up https://www.fico.com/sites/default/files/upload_files/FICO_Average_US_FICO_Score_Ticks_Up_to_706_4776EX_EN%5B3%5D.pdf [1] What Is the Average Credit Score in America? https://wallethub.com/edu/cs/average-credit-scores/25578/#:~:text=The%20average%20credit%20score%20in%20the%20U.S.%20is%20680%20based,%2Dto%2Dgood%20credit%20score.

Why Have Credit Scores Gone Up & Down Over The Years?

While the average FICO score in the United States has always fallen in the good to very good range, many factors have affected whether the average has gone up or down. Average credit scores were at their lowest (686) in the last decade during the mortgage crisis, which shortly after exploded into a full-blown financial crisis. 

2004-2006

For several years, the American economy was being artificially inflated by a housing bubble fueled by easy-to-obtain credit. Banks granted this credit to borrowers with poor credit scores, and they underwrote mortgages with little to no income verification. The percentage of subprime mortgages originated during a given year ranged from 8 percent or lower prior to 2004, to 20 percent from 2004 to 2006. [16] Joint Center for Housing Studies of Harvard University: The State of the Nation’s Housing 2008 https://www.jchs.harvard.edu/sites/default/files/son2008.pdf This combined with small mortgage divisions of major lenders carrying mortgages on their books with higher risk of default was a recipe for disaster.

2007-2009

When U.S. home prices plummeted after reaching their peak in 2006, it became more difficult for borrowers with high-interest subprime loans to refinance. Adjustable-rate mortgages reset at higher interest rates after their teaser rate period expired, causing monthly payments to skyrocket. Delinquencies soared leading inevitably to foreclosures increasing during this time period. [8] Average FICO score hits all-time high https://www.cnbc.com/2019/09/10/average-fico-score-hits-all-time-high.html From 2007 to 2009, America was rapidly escalating from a Mortgage Crisis to a Financial Crisis and ultimately to the Great Recession.

2010-2015

The country spent the following years through 2015 recovering from that recession, but not without severe and long-lasting consequences. The U.S. entered the Great Recession with 9 million jobs lost during 2008 and 2009. It took until May 2014 to get job levels back to the point where they were in 2007. [17] FRED Economic Data: All Employees, Total Nonfarm https://fred.stlouisfed.org/series/PAYEMS The effect of foreclosures on homeowners as well as the inability of consumers to access credit because of banks' reluctance to lend is reflected in the drop in the nation’s credit scores during that time. The slow recovery can be seen in the subsequent gradual climb, and then the brief plateau of America’s average credit score around the 2015-2016 mark.

2016-2019

From 2016 to 2019, America experienced further economic growth. Strong jobs numbers meant low unemployment for American workers. The performance of the stock market exceeded expectations, and increased consumer confidence led to vigorous spending and increased consumer debt. That culminated in a strong 2019 holiday shopping season for retailers. [6] 2019 Consumer Credit Review https://www.experian.com/blogs/ask-experian/consumer-credit-review/

2020 and Beyond

However, while 2020 started strong, the end of Q1 brought the COVID-19 pandemic. Although America’s average credit score still remains in the 700 range, economic stagnation and high unemployment caused by the pandemic threaten Americans’ economic stability. Congress acted swiftly in March by passing legislation meant to protect consumers from the early effects of the pandemic, but it's too early to tell what the overall effects of this will be.

As a result of the legislation, creditors can now attach a disaster code to the loan of a pandemic-affected borrower. This lets credit bureaus know that a consumer is facing financial hardship as a result of the coronavirus, so that their credit score is not adversely affected. [7] Coronavirus still a threat to credit scores despite congressional relief https://www.americanbanker.com/news/coronavirus-still-a-threat-to-credit-scores-despite-congressional-relief These codes could benefit someone who is at risk of missing payments while the codes are in effect, since it stops credit history from being reported to the credit bureaus. However while the disaster codes will not impact the individual’s credit score, they may have a detrimental effect when those individuals apply for future credit.

Impact of High and Low Credit Scores on Finances

As much as a high credit score can help you, a low credit score can obviously make borrowing more difficult. Additionally, other consequences of a low credit score can impact areas of your life in sometimes unforeseen ways.

Borrowing

People think of borrowing because of the “credit” in credit score. It directly references the ability to access funds paid back over time with interest. A low credit score makes it difficult to even qualify for access to those funds, regardless of whether it's an auto loan, a mortgage, or even a smaller personal loan. 

Interest rates

But let’s say you have a sympathetic lender who decides, despite your low score, to give you access to those funds. The access will surely come at a higher interest rate than someone with a more favorable credit score.

Mortgage lenders consider a credit score below 620 as sub-prime. A major exception to this is an FHA loan, which lends to borrowers with scores as low as 500. [10] Low Credit Score Home Buyers In 2020 Could Qualify Because of this new FHA Policy https://mymortgageinsider.com/new-fha-policy-for-low-credit-home-buyers-7494/ Borrowers with low credit scores are considered a greater default risk. [9] The Side Effects of Bad Credit https://www.investopedia.com/the-side-effects-of-bad-credit-4769783 This is particularly true when the debt is unsecured, as is credit card debt.

Let’s take an example of a $200,000, 30-year fixed-rate mortgage. In 2018, a credit score of 760 to 850 could get you a loan at an average interest rate of 4.3% with a monthly payment of $996.

A score between 620-639, considered in the “subprime” range, could get you a loan at an average interest rate of 5.9%. This would have equated to a monthly payment of $1,192.

While these numbers don’t seem staggering, remember that 30 years of these monthly payments add up. The interest alone is a difference of $158,594 for the good credit score versus $229,041 for the subprime credit score. [18] How credit affects your interest rate https://bettermoneyhabits.bankofamerica.com/en/home-ownership/how-credit-affects-interest-rate

While interest rates have fallen since 2018, a low credit score resulting in a higher interest rate and monthly payment is still the same.

Mortgage rates as of September 4, 2020 - 30 Year Fixed

FICO® score

APR

Monthly payment

760-850

2.51%

$1,187

700-759

2.73%

$1,222

680-699

2.91%

$1,250

660-679

3.12%

$1,284

640-659

3.55%

$1,356

620-639

4.10%

$1,449

Source: [19] Home Mortgage Rate Comparison https://www.myfico.com/loan-center/home-mortgage-rate-comparison/default.aspx

Credit Cards

Most banks require a minimum credit score of 670 in order to qualify for a credit card. This means that having a lower credit score can limit your ability to get a credit card, which makes it more difficult to establish a credit history. Individuals with a low credit score and a limited credit history that includes a prolonged effort to pay down a credit card balance could see an even bigger negative impact on their score moving forward. That’s because calculation of a credit score takes into account both payment history and overall credit history. 

The only way to combat this is by establishing a long-term history of making timely payments. Credit cards are a great way to establish good credit. They can also be a simple and dangerous way to crater a credit score by maxing out a credit limit and mishandling credit card debt. This is why it is very important to know how to use and manage credit.

Insurance

Auto insurance is another aspect of a person’s life that a credit score can affect. When you apply for an insurance policy, actuaries (the math guys at insurance companies) can use your credit history to predict how likely you are to file a claim. Lower credit scores affected by stains on your credit history will generally result in higher car insurance rates for drivers in every state except three: California, Hawaii and Massachusetts. These three states forbid insurance companies from using credit history to determine rates. [11] Drivers With Poor Credit Pay Higher Insurance Rates in Most States https://www.nerdwallet.com/blog/insurance/car-insurance-rate-increases-poor-credit/

Renting

A person with a low score and poor credit history can just rent an apartment, right? Not necessarily. Nationwide, the credit score of the average approved renter was 650, while the average rejected renter came in at 538. [13] What Credit Score Do You Need to Rent an Apartment? Insanely High, If You’re in Boston or San Francisco https://www.rentcafe.com/blog/rental-market/credit-score-to-rent-an-apartment/

While this is the national average, it varies widely depending on where you are located. Renting in Boston, Massachusetts requires a credit score almost 100 points higher than a renter in Nashville, Tennessee would need to get approved.

Cities with the Highest Approved Average Credit Scores

City

Avg. Credit Score

Boston, MA

737

San Francisco, CA

724

Seattle, WA

711

Minneapolis, MN

711

Oakland, CA

707

Philadelphia, PA

702

Los Angeles, CA

691

Portland, OR

690

Chicago, IL

690

Nashville, TN

686

Interestingly, while how hot the rental market is can drive the average credit score needed for approval up, it’s not a direct correlation. The most expensive rental market in the United States, New York, has an average approved credit score of between 654-680. [13] What Credit Score Do You Need to Rent an Apartment? Insanely High, If You’re in Boston or San Francisco https://www.rentcafe.com/blog/rental-market/credit-score-to-rent-an-apartment/ [14] What Credit Score Do You Need to Rent an Apartment in New York? https://www.propertynest.com/blog/credit-score/credit-score-rent-apartment-new-york/

There is Hope

A credit score is a double-edged sword. Having and keeping a good score opens a lot of economic doors. On the other hand, having a lower credit score doesn’t necessarily close those doors, but it does make it very difficult to get through them and makes it costly once you do. If you have a lower credit score, it is definitely worth the effort required to increase that score. Making on-time payments over a long period of time is the most effective way to do that.

Sources