Why Our Credit Scores Are Improving

As of March 2015, credit scores have been improving! In fact, The Federal Reserve Bank of New York found that the average credit score was 699. It is even predicted that if present trends continue, the average credit score could cross the 700 threshold within coming months.

The increase in the average credit score can benefit consumers by increasing their flow of credit. This in turn encourages more people to apply for new credit. Additionally, with increasing scores, banks are more willing to lend to the consumer.

Before 2008, getting approved for a new line of credit or for a loan from a bank was relatively easy. However, after the banking crisis, this ‘easy credit’ that consumers were so used to changed drastically. Banks were no longer willing to give out loans unless borrowers had a stable income they could document and could afford the loan they were applying for. This forced consumers to reduce their bad debt by deleveraging and to start paying attention to how credit scores work.

Some articles suggest that increasing credit scores are due to time frames that have gone by since the banking crisis. A recent article in Forbes stated that since the crisis occurred in 2008 and negative information on credit comes off after 7 years, this is why credit scores will continue to rise. There may be a certain amount of individuals that have seen higher scores due to time passing from the crisis, but many began experiencing losses years after the crisis hit and continued to have damaged credit. Individuals lost employment as well as their homes over many years, so it is highly doubtful that scores are on the rise due to the time passing from the banking crisis and the time frames for negative information to remain on credit.

Based on my experience as a credit expert, credit scores are on the rise because individuals and businesses have to change if they want to get loan approvals and credit extensions. Since qualifying for credit is more restrictive now, most people are demanding more knowledge and more information about credit and scores. This understanding is helping consumers improve their scores by navigating the rules of credit correctly. We see poor credit due to the crisis daily and much of it is not due to drop off credit for years to come.

Feel free to reach out to us if you have any credit questions or reports you would like reviewed!