Average credit scores have fallen for the first time in a decade. Here’s how to improve your skills

Your credit score is a number you might not pay much attention to until you’re ready to apply for a credit card or sign for a loan. But in reality, it’s always important to know what your credit score is like.

The higher this number, the more likely you are to be approved to borrow money when you want or need it. When signing a fixed-rate loan, such as a mortgage, a higher credit score may result in a more favorable interest rate.

FICO just released credit score data showing that the average U.S. credit score as of October 2023 is 717. This is notable because the average credit score at the start of 2023 was 718.

Now that we’re only talking about a one-point drop, 717 shouldn’t necessarily sound the alarm about a looming consumer credit score crisis. but it is is It’s worth noting that October’s decline marked the first time in a decade that average consumer credit scores have fallen in each reporting period. (The period through October 2023 is FICO’s most recent period.)

If your credit score has recently dropped, it may be a good idea to get it back to its previous level or higher. And even if your credit score hasn’t fallen recently, you can benefit from a boost nonetheless. Here are some steps you can take to make this happen:

1. Pay all your bills on time

Your payment history carries more weight than any other factor when calculating your credit score. Paying your bills on time can significantly improve your credit score. Or, if you’re already regularly making your payments on time, you can at least keep your score stable.

But for that to happen, you have to give it time. It can take months of on-time payments to see if positive activity is reflected in your credit score, so don’t be discouraged if it doesn’t happen right away.

2. Pay off credit card debt

Credit utilization is another important factor in calculating your credit score. This represents the amount of revolving credit you are using at any given time.

A ratio below 30% generally reflects positively on your credit score, but anything above that score can damage your credit score. In general, it is best to keep that ratio as low as possible. So, if you have a large credit card balance, paying off some of it can boost your credit score.

For example, let’s say your utilization rate is 40% because you owe $4,000 on your various credit cards for a total spending limit of $10,000. If you can pay off $1,000 of that amount, your utilization rate drops to 30%, which is a better place to be from a credit score perspective.

3. Check your credit report for errors.

You can receive a free copy of your credit report each week from the three major reporting agencies: Experian, Equifax, and TransUnion. You don’t need to check your credit report every week. This is overkill. but it is is We recommend checking once every two months or once a quarter.

You never know, your credit report may contain errors against you, such as delinquent debts that you can prove have actually paid on time. That’s why it’s so important to look at your credit report and look at all three bureaus.

Correcting mistakes like the ones mentioned earlier can boost your credit score quite quickly. And why should you allow your credit score to drop for something you didn’t actually do?

It’s not that shocking to see the average consumer credit score drop by one point. A score of 717 or 718 won’t make much of a difference in qualifying for a loan or line of credit. But if your credit score is falling instead of rising, it’s a good idea to do what you can to break that pattern. The higher your score, the more financial benefits you will receive.

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