In late 2016, American consumers hit an important milestone. For the first time in a decade, over half of American consumers (51%) recorded prime credit scores. On the other side of the scale, less than a third of consumers (32%) suffered from subprime scores.¹ As a nation, our average FICO® Score rose to its highest point ever, 700.²

Despite the rosy national picture, we see regional and age-based disparities. A minority of Southerners still rank below prime credit. In contrast, credit scores in the upper Midwest rank well above the national average. Younger consumers struggle with their credit, but boomers and the Silent Generation secured scores well above the national average.

In a new report on credit scores in America, MagnifyMoney analyzed trends in credit scores. The trends offer insight into how Americans fare with their credit health.

1. National average FICO® Scores are up 14 points since October 2009.³
2. 51% of consumers have prime credit scores, up from 48.1% in 2007.⁴
3. One-third of customers have at least one severely delinquent (90+ days past due) account on their credit report.⁵
4. Average VantageScores® in the Deep South are 21 points lower than the national average (652 vs. 673).⁶
5. Millennials’ average VantageScore® (634) underperformed the national average by 39 points. Only Gen Z has a lower average score (631).⁷

Credit scores in America

Average FICO® Score: 700⁸

Average VantageScore®: 673⁹

Percent with prime credit score (Equifax Risk Score >720): 51%¹⁰

Percent with subprime credit score (Equifax Risk Score <660): 32%¹¹

Percent with at least one delinquency: 32%¹²

Average number of late payments per month: .35¹³

Average credit utilization ratio: 30%¹⁴

Percent severely delinquent debt: 3.37%¹⁵

Percent severely delinquent debt excluding mortgages: 6.9%¹⁶

States with the best and worst credit scores

What is a credit score?

Credit scoring companies analyze consumer credit reports. They glean data from the reports and create algorithms that determine consumer borrowing risk. A credit score is a number that represents the risk profile of a borrower. Credit scores influence a bank’s decisions to lend money to consumers. People with high credit scores will find the most attractive borrowing rates because that signals to lenders that they are less risky. Those with low credit scores will struggle to find credit at all.

The Big 3 credit scores

Banks have hundreds of proprietary credit scoring algorithms. In this article, we analyzed trends on three of the most famous credit scoring algorithms:

• FICO® Score 8 (used for underwriting mortgages)
• VantageScore® 3.0 (widely available to consumers)
• Equifax Consumer Risk Credit Score (used by the Federal Reserve Bank of New York)

Each of these credit scores ranks risk on a scale of 300-850. In all three models, prime credit is any score above 720. Subprime credit is any score below 660. All three models consider similar data when they create credit risk profiles. The most common factors include:

• Payment history
• Revolving debt levels (or revolving debt utilization ratios)
• Length of credit history
• Number of recent credit inquires
• Variety of credit (installment and revolving)

However, each model weights the information differently. This means that a FICO® Score cannot be compared directly to a VantageScore® or an Equifax Risk Score. For example, a VantageScore® does not count paid items in collections against you. However, a FICO® Score counts all collections items against you, even if you’ve paid them. Additionally, the VantageScore® counts outstanding debt against you, but the FICO® Score only considers how much credit card debt you have relative to your available credit.

Average FICO® Scores in America are on the rise for the eighth straight year. The average credit score in America is now 700.

On top of that, consumers with “super prime” credit (FICO® Scores above 800) outnumber consumers with deep subprime credit (FICO® Scores below 600).

We’re also seeing healthy increases in prime credit scores, defined as Equifax Risk Scores above 720. According to the Federal Reserve Bank of New York, 51% of all Americans have prime credit scores as measured by the Equifax Risk Score. Following the housing market crash in 2010, just 48.4% of Americans had prime credit scores.²⁰

A major driver of increased scores is the decreased proportion of consumers with collection items on their credit report. A credit item that falls into collections will stay on a person’s credit report for seven years. People caught in the latter end of the real estate foreclosure crisis of 2006-2011 may still have a collections item on their report today.

In the first quarter of 2013, 14.64% of all consumers had at least one item in collections. Today, just 12.61% of consumers have collections items on their credit report. Overall collections rates are approaching 2005-2006 average rates.⁴⁰

Credit scores and loan originations

Following the 2007-2008 implosion of the housing market, banks saw mortgage borrowers defaulting at higher rates than ever before. In addition to higher mortgage default rates, the market downturn led to higher default rates across all types of consumer loans. To maintain profitability banks began tightening lending practices. More stringent lending standards made it tough for anyone with poor credit to get a loan at a reasonable rate. Although banks have loosened lending somewhat in the last two years, people with subprime credit will continue to struggle to get loans. In June 2017, banks rejected 81.4% of all credit applications from people with Equifax Risk Scores below 680. By contrast, banks rejected 9.11% of credit applications from those with credit scores above 760.²²

Credit scores and mortgage origination

Before 2008, the median homebuyer had an Equifax Risk Score of 720. In 2017, the median score was 764, a full 44 points higher than the pre-bubble scores. The bottom 10th of buyers had a score of 657, a massive 65 point growth over the pre-recession average.²³

Some below prime borrowers still get mortgages. But banks no longer underwrite mortgages for deep subprime borrowers. More stringent lending standards have resulted in near all-time lows in mortgage foreclosures.

Credit scores and auto loan origination

The subprime lending bubble didn’t directly influence the auto loan market, but banks increased their lending standards for auto loans, too. Before 2008, the median credit score for people originating auto loans was 682. By the first quarter of 2017, the median score for auto borrowers was 706.²⁶

In the case of auto loans, the lower median risk profile hasn’t paid off for banks. In the first quarter of 2017, $8.27 billion dollars of auto loans fell into severely delinquent status. New auto delinquencies are now as bad as they were in 2008.²⁸

Consumers looking for new auto loans should expect more stringent lending standards in coming months. This means it’s more important than ever for Americans to grow their credit score.

Credit scores for credit cards

Unlike other types of credit, even people with deep subprime credit scores usually qualify to open a secured credit card. However, credit card use among people with poor credit scores is still near an all-time low. In the last decade, credit card use among deep subprime borrowers fell 16.7%. Today, just over 50% of deep subprime borrowers have credit card accounts.³⁰

The dramatic decline came between 2009 and 2011. During this period, half or more of all credit card account closures came from borrowers with below prime credit scores. More than one-third of all closures came from deep subprime consumers.

However, banks are showing an increased willingness to allow customers with poor credit to open credit card accounts. In 2015, more than 60% of all new credit card accounts went to borrowers with subprime credit, and 25% of all the accounts went to borrowers with deep subprime credit.

State level credit scores

Consumers across the nation are seeing higher credit scores, but regional variations persist. People living in the Deep South and Southwest have lower credit scores than the rest of the nation. States in the Deep South have an average VantageScore® of 652 compared to a nationwide average of 673. Southwestern states have an average score of 658.

States in the upper Midwest outperform the nation as a whole. These states had average VantageScores® of 689.

Unsurprisingly, consumers across the southern United States are far more likely to have subprime credit scores than consumers across the north. Minnesota had the fewest subprime consumers. In December 2016, just 21.9% of residents fell below an Equifax Risk Score of 660. Mississippi had the worst subprime rate in the nation: 48.3% of Mississippi residents had credit scores below 660 in December 2016.³⁵

These are the distributions of Equifax Risk Scores by state:³⁷

Credit score by age

In general, older consumers have higher credit scores than younger generations. Credit scoring models consider consumers with longer credit histories less risky than those with short credit histories. The Silent Generation and boomers enjoy higher credit scores due to long credit histories. However, these generations show better credit behavior, too. Their revolving credit utilization rates are lower than younger generations. They are less likely to have a severely delinquent credit item on their credit report.

Gen X and millennials have almost identical revolving utilization ratios and delinquency rates. Compared to millennials, Gen X has higher credit card balances and more debt. Still, Gen X’s longer credit history gives them a 21 point advantage over millennials on average.

To improve their credit scores, millennials and Gen X need to focus on timely payments. On-time payments and lower credit card utilization will drive their scores up.

A report by FICO® showed that younger consumers can earn high credit scores with excellent credit behavior. 93% of consumers with credit scores between 750 and 799 who were under age 29 never had a late payment on their credit report. In contrast, 57% of the total population had at least one delinquency. This good credit group also used less of their available credit. They had an average revolving credit utilization ratio of 6%. The nation as a whole had a utilization ratio of 15%.³⁹

Sources

1. “Community Credit: A New Perspective on America’s Communities Credit Quality and Inclusion” from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed July 23, 2017.
2. Ethan Dornhelm, “US Average FICO Score Hits 700: A Milestone for Consumers,” Fair Isaac Corporation. Accessed July 23, 2017.
3. Ethan Dornhelm, “US Average FICO Score Hits 700: A Milestone for Consumers,” Fair Isaac Corporation. Accessed July 23, 2017.
4. “Community Credit: A New Perspective on America’s Communities Credit Quality and Inclusion” from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed May 24, 2017.
5. “2016 State of Credit Report” National 2016 90+ Days Past Due, Experian. Accessed May 24, 2017
6. “2016 State of Credit Report” State 2016 Average VantageScore®, Experian. Accessed May 24, 2017.
7. “2016 State of Credit Report” National 2016 Average VantageScore®, Experian. Accessed May 24, 2017.
8. Ethan Dornhelm, “US Average FICO Score Hits 700: A Milestone for Consumers,” Fair Isaac Corporation. Accessed July 23, 2017.
9. “2016 State of Credit Report” National 2016 Average VantageScore®, Experian. Accessed July 23, 2017.
10. “Community Credit: A New Perspective on America’s Communities Credit Quality and Inclusion” from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed July 23, 2017.
11. “Community Credit: A New Perspective on America’s Communities Credit Quality and Inclusion” from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed July 23, 2017.
12. “2016 State of Credit Report” National 2016 90+ Days Past Due, Experian. Accessed July 23, 2017.
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14. “2016 State of Credit Report” National 2016 Average Revolving Credit Utilization Ratio, Experian. Accessed July 23, 2017.
15. “Quarterly Report on Household Debt and Credit May 2017” Percent of Balance 90+ Days Delinquent by Loan Type, All Loans, from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed July 23, 2017.
16. Calculated metric using data from “Quarterly Report on Household Debt and Credit May 2017” Percent of Balance 90+ Days Delinquent by Loan Type and Total Debt Balance and Its Composition. All Loans, from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed July 23, 2017. Multiply all debt balances by percent of balance 90 days delinquent for Q1 2017, and summarize all delinquent balances. Total delinquent balance for non-mortgage debt = $284 billion. Total non-mortgage debt balance = $4.1 trillion$284 billion /$4.1 trillion = 6.9%.
17. “2016 State of Credit Report” State 2016 Average VantageScore®, Experian. Accessed July 23, 2017.
18. Ethan Dornhelm, “US Average FICO Score Hits 700: A Milestone for Consumers,” Fair Isaac Corporation. Accessed July 23, 2017.
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20. “Community Credit: A New Perspective on America’s Communities Credit Quality and Inclusion” from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed July 23, 2017.
21. “Community Credit: A New Perspective on America’s Communities Credit Quality and Inclusion” from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed July 23, 2017.
22. Survey of Consumer Expectations, © 2013-2017 Federal Reserve Bank of New York (FRBNY). The SCE data are available without charge at http://www.newyorkfed.org/microeconomics/sce and may be used subject to license terms posted there. FRBNY disclaims any responsibility or legal liability for this analysis and interpretation of Survey of Consumer Expectations data.
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33. Graham Campbell, Andrew Haughwout, Donghoon Lee, Joelle Scally, and Wilbert van der Klauuw, “Just Released: Recent Developments in Consumer Credit Card Borrowing,” Federal Reserve Bank of New York Liberty Street Economics (blog), August 9, 2016. Accessed July 23, 2017.
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