Missed payments and high levels of inflation has led to lower credit scores for consumers.
For the first time in a decade, average credit scores have decreased slightly to 717, according to data released by FICO. In 2023, average scores sat at 718.
This decline is likely due to high interest rates and inflation that are causing consumers to miss more payments and take on higher levels of debt. Since October, more than 18% of Americans have had past-due payments on one or more credit accounts. Compared to April 2023, this is up by 4%, FICO reported.
Missed payments on mortgages and auto loans have gone up but are still lower than they were before the pandemic. It’s missed payments on credit cards that have gone up most, and now exceed pre-pandemic levels.
"The apparent cumulative impact of higher interest rates, elevated consumer prices and economic uncertainty has put a financial strain especially on those consumers who heavily rely on credit cards to cover everyday expenses," FICO stated in its report. "This can lead to higher credit card utilization and subsequent defaults on credit card payments."
One way to get your credit score back up is to consolidate your debt and pay it down quicker. Credible can help you find the loan that’s right for you by showing you several reputable personal loan lenders that offer quick loans.
CONSUMER SPENDING AND DEBT ARE UP AS US ECONOMY BEGINS REBOUND
State governments are taking action to curb the effect medical debt has on credit scores.
Recently, Governor Katie Hobbs of Arizona announced that the state would begin working with a nonprofit, RIP Medical Debt, to forgive medical debt across the state. Over one million Arizonans will reap the benefits of this debt forgiveness.
"Hard-working, middle-class Arizonans should not be forced to have those difficult kitchen table conversations because of medical debt from conditions they cannot control," Hobbs said. "Arizonans deserve a break, and they deserve a government that fights for them, helping ensure that medical debt is not going to torpedo their lives."
About $30 million dollars in COVID relief funds is now being directed toward canceling the medical debt of certain Arizona residents. Those earning less than 400% at or below the federal poverty line or who owe more than 5% of their annual income will be eligible for forgiveness.
California is also seeking to help lessen the effects of medical debt. Attorney General, Rob Bonta stated his support for legislation proposed by state Senator Monique Limón that would bar medical debt from appearing on credit reports.
If the legislation goes through, California would be the third state to remove medical bills from credit reports. Colorado and New York did the same in 2023.
For those still dealing with medical debt, taking out a personal loan with a low interest rate can help you pay it off faster. Use an online marketplace like Credible to compare various rates and lenders to suit your needs.
CONSUMERS BOUGHT MORE SECONDHAND ITEMS IN 2023, BUT MAJOR PURCHASES ARE BACK FOR 2024
For those worried about their credit scores, there are numerous steps consumers can take to make sure their scores stay in the good range. A few of those steps include:
Paying off high-interest debt is also a way to help your credit score. Visit Credible to consolidate your debt into a single, more manageable monthly payment.
STUDENT LOAN BORROWERS FACING FINANCIAL HARDSHIP MAY QUALIFY FOR BIDEN’S NEW ROUND OF DEBT RELIEF
Have a finance-related question, but don't know who to ask? Email The Credible Money Expert at moneyexpert@credible.com and your question might be answered by Credible in our Money Expert column.
