Americans/Floridians Have Record High Credit Scores – With A Catch
Bottom Line: With the holiday shopping season in full swing the average American enters it with a lot of credit card debt but also with rising credit scores. Much has been made of the record amount of credit card debt Americans have racked up in recent years culminating in greater than $1 trillion dollars in outstanding credit card debt for the first time ever most recently. After close to three full years of excessive inflation that’s led to massive affordability issues for the average American it’s perhaps of no surprise that we’ve collectively racked up a record amount of consumer debt – having added $48 billion in additional credit card debt in the 3rd quarter alone. But how are we handling our rising debt situation?
The average credit card balance is currently $6,088 according to TransUnion which is the highest since the onset of the Great Recession and the second highest total on record. That’s the less-than-ideal news. The better news is that the average credit score just hit a record high as well. According to FICO, the average score at the end of the 3rd quarter hit 718 – two points higher than a year ago. What’s a bit odd about that is that credit card delinquency rates are rising, from 1.8% a year ago to 2% currently, the highest since the Great Recession. So how is it that credit card delinquency rates (along with other obligations) are rising but so are credit scores?
Earlier this year delinquent medical debts of under $500 within the first year were removed from credit scores. The impact has been a significant increase in credit scores for many. A year ago, 11.6% of adults had outstanding medical debt in some form of default. Right now, that number is down to 5%. The catalyst hasn’t been people paying off those debts but rather the lack of the reporting of them on credit reports. For the average person with medical debt in default, the result has been an increase of 30 points to their credit score. That’s been enough to overcome rising default levels with credit cards, and other debt obligations, and for a new collective high credit score to be achieved. But in reality, it’s masking underlying weakness. It’s a little unclear exactly what the average credit score would be today without the change, however it’s clear it’d be lower than it is today and certainly not at a record high.
In Florida, our average credit score is trailing the national average checking in at 707 most recently. The good news is that despite the persistent inflation pressures, any way we slice it, it appears as though the average American, and Floridian, has at least “good credit”. However, the notion that that the average person has a record high credit score is a bit misleading. That’s due to the bar being lowered on medical debt instead of lower delinquency levels.