- In July, the average credit score was 711 compared to a reading of 708 in April, according to a report by The Wall Street Journal.
- The report concluded that the increase in credit scores nationwide stemmed from both financial assistance by the government and expanded unemployment benefits.
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The average credit score for Americans rose slightly during the novel coronavirus pandemic, even though times have gotten more stressful and difficult for many.
In July, the average credit score was 711 compared to an average score of 708 in April, the Wall Street Journal reported on Sunday. July’s average also compares to an average credit score of 706 just one year ago.
The report concluded that the increase in credit scores nationwide stemmed from both financial assistance by the government as well as expanded unemployment benefits that made it easier for some Americans pay their bills on time and pay off any debt they might have.
FICO scores range from 300 to 850. They’re calculated based on numerous factors such as payment history, loan applications and credit reports from consumers. The Journal received its data from Fair Isaac Corp., the California-based data analytics company that creates the score.
“First the macro stress occurs, and then it takes a few months for the strain to show up in people’s credit reports,” Ethan Dornhelm, vice president of scores and predictive analytics at FICO, said to The Journal. Dornhelm added that both federal stimulus and deferment programs “are having a further effect of pushing out that stress for many people.”
The unemployment rate declined to 7.9% in September, down from a historic high 14.7% in April, with the US economy adding 661,000 more jobs. Despite the drop in unemployment, other pieces of economic data portray that millions of Americans are still struggling to get by on a daily basis.
“The first few months after reopening was always going to see the easy economic gains,” Seema Shah, chief strategist at Principal Global Investors, said following the release of September’s jobs report by the Bureau of Labor Statistics. “Now is when additional positive economic surprises become harder to come by.”
Long-term unemployment continues to increase after coming off the biggest spike on record, and on Thursday the Labor Department announced that US jobless claims jumped to an unadjusted 898,000 for the week that ended Saturday, October 10.
Negotiations between Congress and the White House for a second stimulus package have stalled ever since the Coronavirus Aid, Relief, and Economic Security Act, or the $2.2 trillion CARES Act, passed in March. On Sunday, House Speaker Nancy Pelosi said that a stimulus deal needs to be reached by Tuesday in order for some type of legislation to be passed by election day on November 3.
Consequently, if both parties can’t reach a deal, then American consumers might see the quality of their credit slowly decline, according to The Journal’s report.
“We’re afraid that in a couple months there could be real damage to credit reports,” Francis Creighton, chief executive of the Consumer Data Industry Association, told The Journal.