Singletary: Average FICO credit score hits new high

“That’s a big milestone,” said Ethan Dornhelm, vice president of scores and predictive analytics at FICO. “It’s worth celebrating when you can improve your score to the point that it starts with a seven.”

Since reaching a bottom of 686 in October 2009 during the Great Recession, the national average FICO score has been steadily increasing.

Dornhelm said the key drivers of the improvement in scores have been the U.S. economic recovery, consumer credit educational efforts, and an initiative by the credit bureaus that has led to certain accounts in collections being removed from people’s credit files.

Increasingly, lenders have been providing free credit scores to consumers. I’ve found that when people know their score isn’t good, they want to work on improving it. The two biggest factors that will boost your score are paying your bills on time and reducing the amount you owe.

Some consumers may have seen a boost in their scores because negative information has been removed. In a report last year, the New York Federal Reserve said collections accounts — which are unpaid debts sent to collection agencies — became more prevalent between 2008 and 2012 as Americans went through financial hardships stemming from the Great Recession.

The data showed the percent of consumers with a collections account dropped from over 14 percent to 12 percent between 2013 and 2017, according to the Federal Reserve. In the fourth quarter of 2017, that share declined to just 9 percent.

The Federal Reserve noted that the decline in collections accounts was the result of an initiative launched by the three major credit bureaus — Equifax, Experian and TransUnion. Under the plan, which is part of a settlement with more than 30 state attorneys general, the credit bureaus agreed to remove certain debt information from consumer files — including civil judgments, tax liens and traffic and parking tickets or fines. The initiative also called for the deletion of previously reported medical collections that had been paid or eventually covered by insurance.

People with FICO credit scores in the 800s often wonder why they haven’t achieved perfection. But you don’t need an exceptional score to be considered a premier borrower.

Here’s why you shouldn’t fret that you don’t have a perfect credit score.

Let’s say you want to purchase a car. Your lender reserves its most favorable auto interest rates for consumers with certain lending criteria that include a credit score of 720 or higher. Anything above this benchmark doesn’t give you any extra leverage.

So, if your credit score number starts with a 7, you’re in good company.