Credit Scores Decreased for The First Time in A Decade — Here’s What You’re Doing Wrong
Your credit score is a measure of your financial worthiness and reliability. In an economy with unprecedented levels of inflation, consumers are relying on credit cards to make ends meet now more than ever before. LendingTree indicated that Americans’ total credit card balance is $1.129 trillion as of the fourth quarter of 2023, a staggering new record and the highest figure since the New York Fed began tracking this metric in 1999.
For You: 5 Ways To Live Like the Super Rich Even if You’re Middle Class
Try This: How To Get $340 Per Year in Cash Back on Gas and Other Things You Already Buy
Credit scores had steadily improved for a decade, but increases in missed borrower payments and rising consumer debt levels are starting to take a serious toll, according to CNBC.
The national average credit score recently fell to 717 from a high of 718 at the beginning of 2023. According to FICO, this is the developer of one of the scores most widely used by financial lenders. FICO scores range from 300 and 850.
Reasons Why Your Credit Might Be Taking A Hit
Here are some reasons why your credit score might have dropped:
You Aren’t Making On-Time Payments: Not making payments on (or before) your monthly due date has a negative effect on your credit score. Missing payments completely is also a contributing factor to bad credit. It was reported that as of October 2023, the share of borrowers with a 30-day past-due missed payment against their credit accounts was also higher.
You Aren’t Paying Your Statement Balance In Full Each Month: Paying your full statement balance each month is crucial. If you charged $2,000, you should pay $2,000 and always avoid the minimum payment if possible. Paying less than your statement balance will result in interest added to the remaining balance, which compounds and will result in growing debt. Not only that, but your credit score will suffer, too.
Your Credit Utilization Is Too High: Your credit score can take a hit if you use too much of your available credit each month. It’s best practice to use 10% or less of your available credit in order to maintain a higher credit score. It’s reported that as of October 2023, the average credit card utilization was 35%, up from 33% a year earlier.
Consider the point above to help improve your credit score and get yourself back on the right financial track.
More From GOBankingRates
This article originally appeared on GOBankingRates.com: Credit Scores Decreased for The First Time in A Decade — Here’s What You’re Doing Wrong
