Experian 2020 Consumer Credit Review

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As Americans entered 2020, the economy—as measured by consumer confidence, spending and stock market performance—was thriving. Two months into the year, however, the nation was struck by the COVID-19 crisis, and the economy slid into territory not seen since the Great Recession.

The coronavirus pandemic and resulting stay-at-home orders and other restrictions led to record unemployment, a plunging stock market, economic uncertainty and thousands of business closures throughout the U.S.

Despite those challenges, and perhaps partly due to relief measures enacted to combat the economic impact of the crisis, some consumers have seen certain aspects of their finances improve since the onset of the pandemic. The national average FICO® Score increased by seven points this year—the largest annual improvement in at least a decade.

Major credit score components, such as credit utilization and payment history, have also changed for the better, with average utilization rates and late payments decreasing at a record pace. Improvements of this kind add to consumers' overall credit health and can cause scores to rise in a short period of time.

As part of our ongoing analysis of credit and debt in the U.S., Experian reviewed credit report data to see how credit scores have changed over the past year and to understand what impact the pandemic has had on credit so far. This analysis compares annually representative data from 2019 with the most recent data from the third quarter (Q3) of 2020.

Read on for our insights and analysis.

Experian 2020 Consumer Credit Review

Average Credit Score in the U.S. Reaches a Record High

Despite the overall economic decline, the average FICO® Score in the U.S. climbed 1% (seven points) in 2020, reaching a record score of 710, according to Experian data from Q3 2020. Compared with the average growth seen over the past 10 years, the increase in 2020 is unusually high.

Snapshot: Consumer Credit and Debt
Avg. FICO® Score703710+7 points (1%)
Avg. total debt balance$92,479$92,727+$248 (0.3%)

Source: Experian

For the past decade, the average FICO® Score has grown at around one point per year. Before 2020, the largest increase in points was a spike of 3.8 points between 2015 and 2016.

In 2020, 69% of Americans had a "good" credit score of 670 or above. That's a 3 percentage point improvement since last year, and shows that the recent growth in scores is helping many Americans move their credit into favorable territory.

"Missed payments reported are down, consumer debt levels are decreasing and the significant steps taken by both the government [with] stimulus spending and private sector [with] lender payment accommodations to help consumers affected by COVID-19 are all contributing to this trend in average score," says Tom Quinn, vice president of scores for FICO.

One-Third of Decade's FICO® Score Increase Occurred in 2020

Looking back, the average credit score has increased in nine of the past 10 years, as consumers have incrementally improved their overall debt management since the Great Recession. And while scores have trended positively, nearly one-third of the growth experienced in the past decade occurred in 2020 alone.

From 2010 to 2020, the average FICO® Score in the U.S. grew by 21 points, or 3.1%, according to Experian data. One-third of that growth—seven points, representing a 1% increase—occurred within the past year, underscoring the magnitude of change recorded in 2020.

As mentioned, much of this growth can likely be attributed to the changes in credit utilization, credit card debt and delinquency rates—all of which have seen improvement since the onset of the pandemic. Though the crisis is not over and all of the final economic impacts have yet to be realized, the initial data indicates that—at least so far—many consumers have managed to insulate their personal credit from the broader economic downturn.

"This has been an extraordinary year for many reasons. From a credit perspective, consumers appear to have done very well despite the pandemic and economic turmoil," says Rod Griffin, Experian's senior director of communication. "However, I think we need to be cautious about whether these numbers will remain strong, or will slide downward as economic stimulus plans and COVID-19-driven payment accommodations expire."

Drop in Credit Utilization, Delinquency Drives Score Growth

Of the five major factors that impact credit scores, payment history is the most important, accounting for 35% of a person's FICO® Score. Credit utilization, which is the amount of available revolving credit in use compared with credit limits, is the second most important, representing 30% of the score. Updates to these factors can change a credit score, causing it to rise or fall depending on what changes.

In 2020, consumers reduced their credit card debt—the most commonly held form of revolving debt—by 14%. This in turn impacted average credit utilization, which dropped 3.5 percentage points, from 28.8% in 2019 to 25.3% in 2020. It's unclear what drove Americans' ability to pay down their credit card debt, but the impact has clearly been reflected in the improvement of the average credit score.

Snapshot: Consumer Credit Utilization
Avg. credit card debt$6,194$5,313-$879 (14%)
Avg. credit utilization28.8%25.3%-3.5 percentage points (12%)

Source: Experian

Along with lower credit card debt, consumers have reduced their average number of accounts reported as late (their delinquency rate). Since 2019, the average percentage of accounts 90 to 180 days past due (DPD) dropped by 53%. The percentage of overall accounts that were 30 to 59 DPD decreased by 37%, and the percentage of accounts 60 to 89 DPD declined by 36%, according to Experian data.

Though the decreases in delinquency rates are significant, the underlying percentages of accounts past due are relatively small. In 2019, for example, the percentage of accounts 60 to 89 DPD was just 0.44%. The 36% reduction in 2020 brought that ratio to 0.28%—a large drop, but still a relatively small portion of accounts.

Snapshot: Payment Delinquency in the U.S.
Avg. % of accounts 30-59 DPD0.86%0.54%-37%
Avg. % of accounts 60-89 DPD0.44%0.28%-36%
Avg. % of accounts 90-180 DPD1.25%0.58%-53%

Source: Experian

While identifying a singular reason for the decline in delinquencies is impossible, some of it may be attributable to the way certain debt payments are being reported as a result of COVID-19 legislation.

The Coronavirus Aid, Relief and Economic Security (CARES) Act signed into law in March provided, among other things, a $1,200 one-time payment to many Americans; enhanced unemployment benefits; and provided guidance that urged lenders to grant accommodations to borrowers financially impacted by the pandemic. The law also suspended repayment of federal student loans and included a mandate that mortgage lenders allow some consumers to place their loans into forbearance temporarily.

These efforts may have given consumers impacted by the crisis breathing room, but as relief measures change or expire and the pandemic continues, a trend of increased delinquency could occur.

Average FICO® Scores Increased Across All States

In past years, average FICO® Score increases overall didn't necessarily mean climbing averages in every state. This changed in 2020, when all 50 states and Washington, D.C., saw their score average increase. Consumers in 25 states saw average scores grow more than the national norm of seven points. The remaining 26 all saw an increase of at least three points on average.

Average FICO® Score Increase by State
Alabama680686+6 points
Alaska707714+7 points
Arizona696706+10 points
Arkansas683690+7 points
California708716+8 points
Colorado718725+7 points
Connecticut717723+6 points
Delaware701710+9 points
District of Columbia703713+10 points
Florida694701+7 points
Georgia682689+7 points
Hawaii723727+4 points
Idaho711720+9 points
Illinois709716+7 points
Indiana699707+8 points
Iowa720726+6 points
Kansas711717+6 points
Kentucky692698+6 points
Louisiana677684+7 points
Maine715721+6 points
Maryland704712+8 points
Massachusetts723729+6 points
Michigan706714+8 points
Minnesota733739+6 points
Mississippi667675+8 points
Missouri701707+6 points
Montana720726+6 points
Nebraska723728+5 points
Nevada686695+9 points
New Hampshire724729+5 points
New Jersey714721+7 points
New Mexico686694+8 points
New York712718+6 points
North Carolina694703+9 points
North Dakota727730+3 points
Ohio705711+6 points
Oklahoma682690+8 points
Oregon718727+9 points
Pennsylvania713720+7 points
Rhode Island713719+6 points
South Carolina681689+8 points
South Dakota727731+4 points
Tennessee690697+7 points
Texas680688+8 points
Utah716723+7 points
Vermont726731+5 points
Virginia709717+8 points
Washington723730+7 points
West Virginia687695+8 points
Wisconsin725732+7 points
Wyoming712719+7 points

Source: Experian

In Washington, D.C., which saw the highest spike compared with everywhere else in 2020, the average FICO® Score grew by 10 points, according to Experian data. Washington, D.C., was followed by Arizona, Delaware, North Carolina and Idaho as the states that saw the biggest annual FICO® Score increase. Nearly all states that saw the greatest improvement in credit score started with scores close to the national average.

States With Greatest Improvement in Average FICO® Score
District of Columbia703713+10 points
Arizona696706+10 points
Delaware701710+9 points
North Carolina694703+9 points
Idaho711720+9 points

Source: Experian

Consumers in North Dakota experienced the smallest increase in average FICO® Score among the states, just three points in 2020. Still, it's significantly more than in 2019, when North Dakota only saw a half-point increase. South Dakota, Hawaii, Nebraska and Vermont rounded out the five states that recorded the lowest FICO® Score growth in 2020. Similarly, the states that saw the least growth had higher than average credit scores.

States With Least Improvement in Average FICO® Score
North Dakota727730+3 points
South Dakota727731+4 points
Hawaii723727+4 points
Nebraska723728+5 points
Vermont726731+5 points

Source: Experian

States With Lower Average Scores Saw Bigger Increases

Noteworthy among the nationwide FICO® Score growth were the locations where consumers saw an above-average increase in their scores. In 2020, the 25 states that saw over a seven-point (national average rate of increase) spike in their average FICO® Score had a collective starting average of 695 in 2019. The other 26 states, which saw below-average growth in 2020, had a collective starting score of 720 in 2019.

This pattern shows that states with generally lower average scores in 2019 fueled larger increases in 2020. Conversely, in states where consumers had higher average scores, growth still occurred, just not with the same strength.

Ultimately, this trend can be seen as positive because not only are higher-scored consumers improving their credit, but those in states with historically lower scores are moving upward, too, and with even more strength.

All Generations Increased Their Average FICO® Score

Though millennials are technically the most populous generation, baby boomers still remain the age group with the most credit-active consumers, since they're the generation with the highest number of credit reports on file.

Millennials, the second-largest credit-active generation, made significant improvements in their debt and credit for a second year in a row, likely driving much of the growth in the average FICO® Score.

Since 2019, millennials increased their average FICO® Score by 11 points, according to Experian data. They did this while adding the most debt of any age group, increasing their total average debt balance by nearly $10,000.

The silent generation recorded the lowest average FICO® Score increase, just one point in 2020. Despite having the smallest increase, members of the silent generation still maintain the highest average FICO® Score of any age group, at 758.

Change in FICO® Score by Generation
Generation Z (18-23)667674+7 points
Millennials (24-39)668679+11 points
Generation X (40-55)688698+10 points
Baby boomers (56-74)731736+5 points
Silent generation (75+)757758+1 point

Source: Experian (ages as of 2020)

U.S. Consumer Debt Snapshot

Though certain debt categories have experienced decreased balances since 2019, most debt types saw modest growth in 2020. There were increases in personal loan, auto loan and mortgage debt, while credit card debt and home equity line of credit (HELOC) balances decreased.

Change in Average Balance by Debt Category
Debt Type20192020Change
Credit card$6,194$5,315-14%
Personal loan$16,259$16,458+1%
Auto loan$19,231$19,703+2%
Student loan$35,620$38,792+9%
Mortgage loan$203,296$208,185+2%

Source: Experian

Consumer Credit Card Debt Showed Biggest Decrease

  • 75% of U.S. adults have a credit card balance greater than $0.
  • The average FICO® Score for someone with a credit card balance in 2020 was 735.
  • The percentage of consumers' credit card accounts 30 or more DPD decreased by 29% in 2020.

In 2020, credit card balances saw the most drastic change of any debt type, reversing a nearly decade-long period of growth and decreasing by 14%. Credit cards are the most popular form of debt: More than 90% of U.S. adults have a credit card account listed in their credit report.

Credit card late payments have also decreased, and the percentage of consumers' accounts that are 30 or more DPD was reduced by 29% in 2020. This change in delinquency is a stark reversal from 2019, when the percentage of credit card accounts 30 or more DPD increased by 3%. Improvements in payment history of this magnitude—if sustained—could have lasting effects on consumer credit scores.

Generally speaking, revolving debt (such as credit card debt) carries more weight than installment debt in FICO® Scores. The trend of lower credit card balances is also driving lower revolving utilization ratios, which is having a positive effect on average FICO® Score results.

Personal Loan Growth Slowed From Last Year's Record High

  • 22% of U.S. adults have a personal loan.
  • The average FICO® Score for someone with a personal loan in 2020 was 689.
  • The percentage of consumers' personal loan accounts 30 or more DPD decreased by 27% in 2020.

Despite growing by 12% in 2019, personal loan balances saw the least growth in 2020, at just 1%. Personal loan balances rank near the bottom compared with other debt types, with consumers owing an average of $16,458 in Q3 2020. Across the nation, nearly one-quarter of adults have a personal loan.

Personal loan accounts also saw a dramatic decrease in delinquencies, with the percentage of loans 30 or more DPD falling by 27% in 2020. Though personal loan delinquencies in 2019 also decreased (-2%) from the prior year, this drop was 25 percentage points higher in 2020.

Auto Debt Growth Stayed Steady

  • 62% of U.S. adults have an auto loan.
  • The average FICO® Score for someone with an auto loan balance in 2020 was 712.
  • The percentage of consumers' auto loan accounts 30 or more DPD decreased by 22% in 2020.

Auto debt is the second most popular type of credit, and more than half of the nation's adults have an auto account listed in their credit reports. Average consumer auto debt experienced one of the more modest increases in 2020, growing by only 2%—the same increase as last year.

The percentage of consumers' auto loans 30 or more DPD went down by 22% in 2020. This decrease is a reversal from 2019, when this figure increased by 1%. Unlike other debt types, auto loans did not see any sweeping government guidance aimed at providing consumer debt relief during the pandemic. Any decisions to modify repayment of auto loans—where and when it occurred—resulted at the discretion of individual creditors. Additionally, accommodations for mortgage and student loan payments may have also contributed to consumers' ability to make their auto payments on time.

Student Loan Balances Saw Highest Increase

  • 14% of U.S. adults have a student loan.
  • The average FICO® Score for someone with a student loan balance in 2020 was 689.
  • The percentage of consumers' student loan accounts 30 or more DPD decreased by 93% in 2020.

Student loan balances saw the most significant spike in 2020, with consumers' average debt growing by 9%. Much of this is attributable to the suspension of federal student loan repayment that was included in the CARES Act and subsequently extended through January 31, 2021. With fewer people actively paying down student debt, average balances will grow as others add new loans.

Student loans saw delinquency rates plunge, with the percentage of accounts 30 or more DPD decreasing by 93% in 2020. It's important to view this number in context, however, as the automatic accommodations put in place obviously played a major role in the drop.

The CARES Act (and subsequent extensions) paused all federal student loan repayment, effectively placing these accounts in limbo. While paused, student loan accounts are being reported as current, although no payments are required. Once repayment begins, delinquencies may begin to climb again.

HELOCs One of Only Two Debts to See Balances Decrease

  • 12% of U.S. adults have a HELOC.
  • The average FICO® Score for someone with a HELOC in 2020 was 777.
  • The percentage of consumers' HELOC accounts 30 or more DPD decreased by 26% in 2020.

Consumers' HELOC debt was one of only two debt types that saw balances decrease in 2020. HELOC balances shrank by 7% compared with 2019, when these balances saw a 4% reduction. The average credit score among consumers with HELOCs was the highest of any debt type—nearly 70 points higher than the average FICO® Score in the U.S.

In line with most other debts, HELOC delinquencies shrank by 26% in 2020. Compared with 2019—when the ratio dropped 6%—the percentage of accounts 30 or more DPD dropped by 20 percentage points more in 2020.

Mortgage Debt Grew by 2% in 2020

  • 44% of U.S. adults have a mortgage.
  • The average FICO® Score for someone with a mortgage in 2020 was 753.
  • The percentage of consumers' mortgage accounts 30 or more DPD decreased by 46% in 2020.

Mortgage debt represents the largest outstanding debt in the U.S., and in 2020 consumer balances grew by 2%—the same rate they grew from 2018 to 2019. Despite the pandemic, consumers across the country still bought homes, many fueled by the record drop in interest rates that accompanied the economic decline. Nearly half of all adults in the U.S. have a mortgage, and the average FICO® Score among these homeowners is more than 40 points higher than the national average.

Mortgage accounts saw the second largest decrease in accounts 30 or more DPD, dropping by 46% in 2020. Compared with 2019's drop from the prior year of 6%, 2020's improvement in 30 or more DPD accounts is significant.

This is likely due to the fact that the CARES Act and other government intervention provided relief for mortgage borrowers, giving those impacted by COVID-19 the right to request a forbearance. During forbearance, it was stipulated that mortgage accounts could not be reported negatively to the credit bureaus, a move that helped insulate consumer credit scores.

Fewer Consumers Had Subprime Credit in 2020

One effect of the 2020 average FICO® Score increase was the reduction in the number of consumers with subprime credit. This designation is typically given to those with scores between 580 and 669, but for the purposes of this analysis, we include all consumers with scores under 670.

Since 2019, the portion of consumers with a subprime score has decreased from 33.8% to 30.9%—a nearly 3 percentage point drop. This improvement is significant and is three times as large as the improvement between 2018 and 2019, when the ratio decreased by less than 1 percentage point.

Among people included in the subprime category, the average FICO® Score rose from 578 to 583 in 2020. This 5-point increase is aligned with the national growth, but illustrates the depth of change occurring throughout the country.

Typically, subprime designations are used by lenders to identify consumers who may have a harder time paying back their debt in full and on time. While some lenders work with subprime borrowers, others may not, and having a score in the subprime range could restrict some borrowers from obtaining credit.

The fact that the 2020 improvement in credit scores touched customers in lower credit ranges is especially impactful, as these people may have had severely restrained access to credit. An improved credit score in their situation could open previously closed doors to credit opportunities.

Credit Trends in Changing Times

It's undeniable that consumers have made historic strides in improving their credit in 2020. But as the COVID-19 pandemic continues, it's important to keep in mind that these trends may change.

Much of the improvement that occurred in 2020 took place in a period of a few months, which means the changes to credit scores occurred more quickly than usual. It also means that the changes could be reversed quickly if consumers experience ongoing economic hardship and their underlying credit report data changes.

As coronavirus-related financial protections continue to change, the data reported to credit bureaus could shift as accounts are updated. Without sufficient government or lender accommodations, consumers struggling to meet their debt obligations could fall behind in the months ahead.

This analysis looks at the most recent (upon date of publication) data from Q3 2020 and compares it with an annual snapshot for 2019 and other years cited. As time goes on, we will continue to monitor changes to consumer credit reports and will provide updates when notable change occurs.

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