And the passage of time since the Recession and Housing Crash helps too

 

It’s a credit score double record: this Spring the average credit score for adults across America hit a record high, while the share of U.S. adults with the riskiest scores reached an all-time low.

 

In increasing numbers, the credit-worthiness of millions of Americans is growing according to the reports issued by Fair Isaac Corp., the creators of the FICO credit score that determines a consumer’s credit rating, that all-important number between 300 and 850 that lenders use to gauge individual credit limits and borrowing options for homes and vehicles.

 

These records reflect a series of progressive changes in the credit score calculation process that now make it easier for millions of Americans to obtain loans. For example, back in Summer 2014, FICO scores stopped including records of consumers failing to pay a bill if the bill was paid or settled by a collection agency. Then in March of this year, the WSJ reported that “many tax liens and civil judgments soon will be removed from people’s credit reports, the latest in a series of moves to omit negative information from these financial scorecards.”

 

Now, the Wall Street Journal reports the effects of these changes are being seen: in April the average credit score hit 700, which is the highest since 2005 (when the data first started being tracked); and the number of Americans with scores below 600 reached a new low of only 20% of American adults, approximately 40 million consumers.

 

In an added boost, consumers who struggled with foreclosures and bankruptcies between 2007 and 2010 are now seeing those events fall from their records as the 7-10 year reporting span comes to a close. According to a recent Barclays report, over 6 million Americans will have personal bankruptcies disappear over the next 5 years. As the WSJ points out:

 

  • Mortgage foreclosures stay on credit reports for up to seven years dating back to the missed payment that resulted in the foreclosure. Foreclosure starts, the first stage in the process, peaked in 2009 at 2.1 million, according to Attom Data Solutions. They totaled nearly 1.8 million in 2010 and remained above one million during each of the next two years.
  • Personal bankruptcies are more complicated and can stay on credit reports for seven to 10 years.
  • Consumers who filed in 2007 for Chapter 7 protection—the most common type of bankruptcy, in which certain debts are discharged and creditors can get paid back from sales of consumers’ assets—are now starting to see those events fall off their reports.
  • Some 500,000 Chapter 7 bankruptcy cases were filed in 2007, a figure that swelled to nearly 1.1 million in 2010, according to the Administrative Office of the U.S. Courts.
  • Chapter 13 bankruptcies, in which consumers enter a payment plan with creditors, usually stay on reports for at least seven years. Those filings reached a recent peak of nearly 435,000 in 2010 and are set to start falling off reports this year.

 

All of which means that not only will many Americans now be approved for credit cards for which they were previously rejected, but many Americans who have been forced to rent will now qualify for a home mortgage. Of course, time alone will tell if we as a nation have learned the lessons of from last decade’s credit crises.