Average FICO Score dips as student debt borrowers fall into severe delinquency
Credit scores are dipping, partly driven by the resumption of federal student loan delinquency reporting on U.S. consumers’ credit, credit scoring agency FICO said.
The average FICO score that lenders use to assess risk fell to 715, down a point from January and two points from a year ago, FICO said. The drop reflects a rise in 90+ day delinquencies in the past six months. The share of consumers in that category increased to 8.3% in February from 7.4% in January, a 12% relative rise, and the first time this figure surpassed the pre-pandemic January 2020 level of 8.1%.
Much of the rise in 90+ day delinquencies is because federal student loan delinquencies are being reported on credit files for the first time since March 2020, FICO said.
“Even after payments on federal student loans resumed in late 2023, delinquencies were not immediately reported on credit files due to the one-year “on ramp” period introduced by the Department of Education,” said Tommy Lee, FICO director. “Add in the fact that federal student loan delinquencies are not reported until they are 90 days past due and federal student loan delinquencies have only just started showing up in the credit report again as of February 2025.”
What is a FICO Score?
A FICO score is a three-digit number based on the information in your credit reports that lenders use to determine how likely you are to repay a loan. It helps lenders decide how much you can borrow and at what interest rate and how many months you have to repay.
The FICO score typically ranges from 300 to 850, with 850 being the top score. It is calculated based on payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%) and credit mix (10%).
How many student loans are delinquent?
When the pandemic began in March 2020, all federal student loans were put in forbearance. Starting in October 2023, payments resumed, but nonpayment wasn’t reported to credit bureaus because the Department of Education provided borrowers with a so-called on ramp. The on-ramp was a 12-month moratorium on reporting loan defaults to credit bureaus to protect borrowers.
Since delinquencies aren’t reported until 90 days past due, the first wave of severe, or 90+ days, delinquencies hit in February, Lee said.
In February, he estimates about 2.7 million student loan borrowers had severe delinquencies with more to come since all loans have different dates.
Between March and April, he said over 5 million more severe delinquencies could get reported.
Silver lining?
A drop in the average FICO Score is never great, but Lee noted the average FICO Score of 715 in April remains close to the all-time high of 718.
“Most consumers are still in good standing,” he said.
And for those who are severely delinquent, making payments and lowering the amount of credit card debt you carry month-to-month can boost your score again.
FICO Scores are dynamic, updated each time your credit file changes, which Lee said is about monthly.
“Even if you have a recent delinquency, the impact to your credit score lessens over time,” he said. “So, if time passes, if consumers and borrowers have strong credit habits -- only apply for credit as needed, carry small balances – your credit score will improve over time.”
Medora Lee is a money, markets, and personal finance reporter at Paste BN. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday.