Finance Fizz: How Your Credit Score Is Keeping You Broke (with a Pinch of Insights)
Decline in typical U.S. credit scoring explained:
Your credit score - that elusive three-digit number that's been notoriously hard to pin down - seems to be giving you a hard time. Micah Smith, CEO, founder, and finance influencer, spills the beans to Fox News Digital on why so many Americans are in a financial pickle due to the resurgence of a sneaky credit crisis.
Back in February 2025, federal student loan delinquency reporting came crashing back to the scene after a five-year hiatus, caused by the CARES Act and the Department of Education's grace period. The consequences? A whopping 8.3% of consumers had more than a 90-day delinquency in the past six months - the first spike above pre-pandemic levels. Talk about a wild rollercoaster ride!
Curious about how FICO scores are determined? They skate over borrower behavior, tracked by the heavy-hitters of credit bureau-world: Equifax, TransUnion, and Experian. These stats provide the soil for banks and lenders to decide on lending money confidently.
FICO scores are victims of cold, hard facts. They accurately reflect the state of our consumer credit thanks to resuming student loan delinquency reports. But every cloud has a silver lining. The average U.S. credit card use (30% of Fico score) saw a decrease in February due to holiday season balances. A tart taste of good news in the midst of bellyaching scores!
The FICO deluge of doom forecasts more declines in the average FICO score over the next few months, given the fact that millions of borrowers in risky terrain failed to stay on top of their loans and have not made any payments since late 2024. A crazy cat-and-mouse chase ensues...
Our old friend Tommy Lee, Senior Director of Analytics and Scores at FICO, belts out a warning. More than 2.7 million borrowers saw fresh student loan delinquencies reported, while around 5.4 million had no delinquency on record - but payments were due. Hold your breath, folks, as another juncture in this A-to-Z lesson in credit misery unfolds. The borrowers in question faces the dreaded possibility of credit score downfall, should they walk the wrong path and fail to pay.
What About the States?
Don't forget about the states with the highest student loan delinquency rates. A close look reveals Mississippi, Alabama, West Virginia, and Kentucky battling rates above 30%. Looks like select states need a real-life academic intervention!
Seeing red and green, Tommy Lee from FICO adds, "The longer delinquencies persist, the harder it will be for repayment and a stable credit standing." Ouch!
In light of the credit storm brewing, brace yourselves for these raindrops of insight:
- Many borrowers, who once had scores in the qualifying bracket of 620+, saw their scores drop significantly, making it tougher to snag mortgages, auto loans, and other credit—meaning higher costs for you.
- After the average credit score drops, access to credit decreases, and borrowing costs swell. Sadly, this will lead the national average FICO score to be compared to pre-pandemic levels again.
With credit scores and FICO resting on thin ice, you never know what twist and turns await. Stay prepared, and take Tommy Lee's advice to avoid default: prioritize timely payments and keep credit card balances low.
- The resurgence of student loan delinquency reporting, as seen in February 2025, has led to a significant increase in the number of consumers with more than a 90-day delinquency, affecting their personal-finance and credit scores.
- In the education-and-self-development sector, states like Mississippi, Alabama, West Virginia, and Kentucky have been battling high student loan delinquency rates, signaling a need for intervention and better financial literacy.
- Engaging in sound investing practices, such as making timely loan payments and keeping credit card balances low, can help individuals maintain a healthy credit score during challenging economic times, ultimately aiding them in securing loans for mortgages, automobiles, and other financial ventures.
