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TAKEAWAYS KEY
- The average FICO credit score in the U.S. fell to 715 by February, mainly because of federal student loans that were past due.
- In February, the credit bureaus reported the delinquent status of a record 2.7 million student loan borrowers for the first time in 5 years.
- It is possible that the FICO score of many consumers has been lessened due to their holiday debt.
The average FICO score in the United States fell in February due to federal student loan delinquencies that began impacting credit reports in February for the first time since 2005.
The average FICO credit score in the United States was 715 in February. This is one point lower than it was in January and two points less than it will be in April 2024. Tommy Lee, FICO’s senior director of Analytics and Scores, wrote that a large part of the drop can be attributed to delinquent student loans.
During the COVID-19 Pandemic, the federal federal government did require payments on federal loan payments until October 20, 2024. After payments resumed, those who missed a repayment did not see any impact on their credit until the end of February due to the government’s “on-ramp” period.
Federal Reserve Bank of New York estimated that 9.7 million borrowers would see their credit ratings drop due to delinquent student loans. FICO reports that only 2.7 millions borrowers had delinquent student loan debt reported to the credit bureaus in February.
In the coming months, however, it is expected that more student loan delinquencies will be reported. FICO reports that, although delinquencies have not been reported yet, approximately 5.4 million students have not paid a student loan since the pause was lifted.
Delinquency rates for all loans have now surpassed the pre-pandemic benchmark in January 2020. In February, consumers who were delinquent for more than ninety days in the past six months increased from 7.4%. FICO attributed this increase to the reporting of student loan delinquency.
A lower credit card balance may have also helped to lessen the impact of student loan delinquencies. The average credit utilization, which is the percentage of credit available to a borrower that was used, decreased from February to January. As consumers paid down their holiday debt, their balances decreased. This improved the average FICO score, and offset some of the declines that were caused by those who had missed student loan repayments.
