Americans' credit scores highest since 2011, Experian says

Americans appear to be off to a good start financially in 2020 – as many are set up well for loan and credit approval.

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According to Experian – one of the main credit reporting companies – the average credit score increased two points from last year to 682. That is the highest level since 2011.

“We’re seeing a promising trend in terms of how Americans are managing their credit as we head into a new decade with average credit scores increasing two points since 2018 to 682 – the highest we’ve seen since 2011,” Shannon Lois, Experian’s head of analytics, consulting and operations, said in a statement.

Unsurprisingly perhaps, average ratings rose with age. Generation Z had the lowest average score – of 641 – while the Silent Generation had the highest – at 731.

The average person has about three credit cards with average balances of $6,630.

IS YOUR CREDIT SCORE ACCURATE?

CREDIT SCORE ON THE DECLINE? THIS COULD BE WHY 

A recent contrasting analysis, however, found that credit scores for people aged 30 to 59 actually declined in June when compared with April of last year.

The potential culprit? Higher delinquency on auto loans, Deutsche Bank Research posited. Auto loan balances increased by $18 billion in the third quarter, according to the New York Federal Reserve Bank, to $1.32 trillion. About 2.34 percent of auto loans were in serious delinquency, or 90 days-plus overdue.

As previously reported by FOX Business, there are concerns that credit scores don’t accurately reflect a borrower’s financial situation – and corresponding ability to make repayments.

According to research from Moody’s Analytics, that’s because there are a variety of external economic factors that impact a borrowers’ ability to make payments, which aren't being taken into account by current underwriting standards.

It is much easier to meet monthly payments, for example, when the job market is strong and wages are increasing – making it difficult to differentiate between people who are only able to pay because the economy is strong.

In the event of an economic slowdown, lenders could find that some borrowers who have been deemed creditworthy might have a harder time making payments.

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For people looking to raise their rating, there are a few steps to take that can help. Among them are paying bills on time, being wary of how much credit is utilized and having active older accounts.

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