Credit scores affect almost every aspect of consumers’ lives, including when they apply for a mortgage or rent an apartment. Higher credit scores make it easier for people to get loans and reduce the costs of borrowing. And good news – credit scores are up. According to a recent study by Experian, the consumer credit reporting company, the average FICO score in the U.S. in 2019 was 703, a record high, up two points from 2018 and up 14 points since 2010.  (The Fair, Isaac and Company, or FICO, score has been a mainstay of consumer lending in the U.S. for decades.)

FICO scores are generally higher for older people. The average FICO score for Millennials was 668 in 2019. By comparison, Gen X’ers had an average FICO score of 688 and Boomers average a 731 FICO score. However, the record high in 2019 was driven by a significant 25-point increase in average credits scores among Millennials since 2012.

According to Experian, the increase in FICO scores has been driven by changes in consumer credit behaviors, including reductions in payment delinquencies and decreases in credit card utilization. In 2019, nearly six out of 10 Americans had a FICO score of 700 or higher, the greatest percentage since data on credit scores have been tracked. Some have claimed that the higher scores represent “credit score inflation”, simply reflecting the fact that black marks on credit scores have disappeared now that we are seven years out from the recession. However, there are underlying changes in borrowing behavior that suggest consumers are handling some types of credit more responsibly.

FICO Scores are Higher in Virginia

The average FICO score in Virginia was 709 in 2019, higher than the U.S. average and up a point from 2018. In Virginia, credit scores were highest in Charlottesville. At an average of 730, Charlottesville ranked 22^nd out of the 50 largest U.S. metro areas in terms of highest average FICO score in 2019.

In January, Fair, Isaac and Company announced that changes would be made in how the long-running FICO score was calculated.  About 80 million Americans will see their FICO score change, with nearly half expected to experience a drop. FICO adjusts the way it calculates credit scores every few years to reflect data on consumer behavior and patterns over time. This most recently-announced change will take into account a longer period of credit behavior and will include more data on personal loan transactions, which have become more common in recent years.

The new FICO score calculations will not affect people applying for most mortgages, at least not for a while. Home loans guaranteed or backed by Fannie Mae and Freddie Mac, which include the majority of home mortgages, will still use the older version of the FICO scores. Fannie and Freddie will announce if and when they plan to move to using the new scores, with a phase-in period built in. Eventually, however, it seems as though borrowers with already good credit likely will get a boost from the new calculation. As a result, when applying for home mortgages, there could be additional savings on interest and fees for this higher-credit group.