Credit scores rise to all-time high during pandemic

The pandemic has wreaked havoc on virtually every aspect of life in Minnesota, across the nation and around the world. One of the few things to have actually improved during these tumultuous months: the average American consumer’s credit score.

That’s according to the Fair Isaac Corporation – the data analytics company that supplies the proprietary algorithm used by major credit bureaus to determine credit scores known as FICO (an acronym based on the company’s name).

Big bump up in scores

Fair Isaac says the average credit score is now 711 – five points higher than it was a year ago.

It should be noted that FICO scores range from 300 to 850 and is used by lenders to determine credit risk. Lower scores typically require consumers to pay higher interest on loans, or can mean that the consumer will be denied a loan or credit card.

Three main avenues of improvement

According to an NBC article, the pandemic enabled families that weren’t among the hardest hit to find credit relief in three main ways: using part of their stimulus check to pay off debts, saving on pricey luxuries such as eating out and traveling, and taking advantage of lower interest rates to refinance their homes.

Of course, for some people, those credit-improving options are simply not available because of FICO score-damaging credit reporting errors. They can’t refinance their homes, for instance, because of their negatively impacted FICO.

Another appearance of risk

They could also be prevented from obtaining a credit card with better terms because the reporting error makes them appear to lenders to be too risky.

Reporting errors commonly occur after a bankruptcy or ID theft, but can also involve glitches in which another one person’s credit history shows up in another person’s credit report.