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How Does Your Credit Score Compare to Your State’s?
Record unemployment rates, a wild swing in America’s GDP and homeownership rates increasing month over month. Despite these examples of economic volatility of 2020, another surprising number emerged — America has now reached an all-time average high credit score.
Experian’s latest Consumer Credit Review highlights new trends regarding credit. Not only does the credit score landscape change among generational groups and consumer’s location, but it’s clear Americans are focused on paying down specific types of debt, all leading to an overall score improvement.
69% of Americans had a credit score of 670 or higher
This credit score average stands out because only in the year prior was the percentage at 66% and then jumped up three percentage points in one year. The average American credit score from 2020 sits at 710, which also significantly increased from the prior year.
In 2019, the average score for Americans was 703. This level of growth is unusually high compared to observations from the last 10 years, where FICO scores tend to only grow about one percentage point per year.
[ Read: How to Raise Your Credit Score ]
The increase in credit scores now puts more Americans in FICO’s “good” credit score range. If a credit score lands between 670 to 739, it opens up more borrowing opportunities from lenders, and consumers in this range should qualify for most credit cards and loans. According to Rod Griffin, Senior Director of Consumer Education and Advocacy for Experian, there are promising signs for how consumers are managing their credit histories, despite challenging financial situations due to the pandemic.
“Credit scores have continued to improve, which is a trend we’ve seen over the last ten years or so, reaching an average score of 688. Lower credit card balances, fewer missed payments and lower credit utilization, or balance-to-limit ratios, have supported this increase in average scores,” adds Griffin.
|Average U.S. FICO Credit Score||703||710||+ 7 points (1%)|
|Average U.S. Credit Card Debt||$6,194||$5,313||-$879 (14%)|
|Average U.S. Credit Utilization||28.8%||25.3%||-3.5 (12%)|
Source: Experian 2020 Consumer Credit Review
Average credit score in each state
Not only did average credit scores increase overall, but there appear to be trends emerging within specific states. For example, the top states in the country that saw the highest increase in overall credit score were Arizona, Delaware, Idaho, North Carolina and Washington D.C. These states averaged about a 9 or 10 point increase in average score from 2019.
[ Read: What Is a Good Credit Score Range? ]
On the other hand, North Dakota, South Dakota, Hawaii, Nebraska and Vermont recorded the lowest growth in average credit scores from 2019 to 2020. But what is noteworthy about these states is they already had higher-than-average credit scores to begin with, which means there was less room for an increase to occur. But overall, no matter the location, there is an upward trend in credit scores across America.
Average credit card debt down 14%
Credit scores are not the only numbers showing interesting trends. Overall, the U.S. average consumer debt decreased by 14%, even amid an economic downturn. This has a trickle-down effect with credit utilization, which also experienced a decrease of 3.5%. This means not only are Americans paying more towards credit card balances, but the available credit for each individual is loosening up.
As Americans pay down their credit card balances and decrease their credit utilization, the result is typically an increase in credit scores. Balances and utilization are two major factors used to calculate the FICO credit score.
It might seem odd that in the middle of high unemployment numbers and jobless claims that credit card debt would decrease. But with federal student loan payments and interest accrual on pause from the CARES act of 2020, it appears the debt payoff shifted to credit cards and not student loans.
When you look specifically at federal student loans only, borrowing either stayed the same or increased from 2019 to 2020, depending on the type of loan. Student loans, both federal and private, do show on consumer’s credit reports, but it’s the credit card balances showing the decrease in 2020, not student loans.
Credit scores improved the most among Millenials
Similar to how location influences the numbers of increased credit scores, age appears to be a factor as well. When examining the averages, it becomes clear how different the increases in credit scores are among the different generations.
- Millennials (ages 24-39) increased their average FICO score by +11 points from 2019 to 2020.
- Gen X (ages 40-55) increased their average FICO score by +10 points.
- Gen Z (ages 18-23) increasing scores by +7 points.
Even though Baby Boomers (ages 56-74) and The Silent Generation (age 75+) had less of an increase, +5 and +1 respectively, these numbers indicate America as a whole is increasing credit scores overall, no matter the age.
“Millennials have continued to improve their credit scores. In 2019 they had an average credit score of 647. This rose to 658 in 2020. While still below the average of 688, responsible borrowing habits, including fewer missed payments and lower card balances, are helping Millennials move their credit scores in a positive direction. This trend should encourage Millennials and all consumers to be proactive in protecting and maintaining their credit histories during this time,” explains Griffin.
Image credit: GaudiLab