Key measure of US economic health plunges in latest red flag (2025)

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America’s credit score just took its biggest hit since the 2008 crash.

The average FICO score in the US has dropped to 715 from 717— the largest one-year drop since the Great Recession, according to new data from the credit-rating giant FICO.

The slip may sound small, but experts say it’s a red flag for household finances.

Americans are falling behind on more bills. Credit card balances are up, interest rates remain high, and more borrowers are struggling to keep up with payments on everything from car loans to mortgages.

Failing to make payments causes a hit to credit scores since it indicates that they are a riskier borrower.

For the first time since March 2020, missed federal student loan payments are also being reported on credit files — and it's fueling a surge in serious delinquencies.

'This is really driving the increase in severe delinquencies,' Tommy Lee, senior director of scores and predictive analytics at FICO said of the report.

During the pandemic, those missed payments were paused and hidden from credit reports, but that protection expired last fall.

However, the relief period officially ended on September 30 2024, and the Federal Reserve Bank cautioned in March that those with late payments would see'significant drops' in their credit scores.

'We expect to see more than nine million student loan borrowers face substantial declines in credit standing over the first quarter of 2025,' the Fed researchers wrote in a March blogpost.

'Although some of these borrowers may be able to cure their delinquencies, the damage to their credit standing will have already been done and will remain on their credit reports for seven years,' they explained.

A lower credit score can reduce a consumer's credit limit and higher interest rates when they apply for loans.

Average credit scores fell to a low of 686 in October 2009 during the financial crisis due to a surge of foreclosures.

In the years since they ticked upwards reaching a record high of 718 in 2023 as a result of government stimulus checks and a spike in household savings.

However, inflation caused a harsher consumer environment and credit card balances and missed paymentsbegan to rise.

Last year marked the first decline in over a decade when average scores dropped to 717.

This year scores fell for the second time in a decade as severe delinquencies, missed payment of 90 days or more, surpassed pre-pandemic levels for the first time.

The higher your credit score the more likely you are to get a loan at a good rate.

Improving your credit score from 'fair' to 'very good' - deemed somewhere between 740 to 799 - could end up saving you $39,000 over the lifetime of your balances, a recent analysis by LendingTree found.

This is because you would pay less in mortgage costs, credit card rates, auto loans and personal loans.

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