Credit scores could be hiding a dark secret. While the average credit score in the US remained unchanged at 701, the number of people whose credit score dropped were offset by those whose score went up, according to an analysis from VantageScore.
VantageScore’s Prime credit score range (661 – 780) shrunk by 1.1% year over year, with 0.7% of consumers’ credit scores rising above 780 and 0.5% of consumers sinking to the lowest tier, under 600.
And while delinquency rates have consistently risen across nearly all types of loans and past-due-date categories, those with the lowest credit scores suffered some of the biggest increases in delinquencies year over year.
“The tale of two consumers is becoming more pronounced,” Susan Fahy, executive vice president and chief digital officer at VantageScore, said in a press release. “VantageScore Superprime consumers are still spending and borrowing while VantageScore Subprime consumers are finding it increasingly difficult to stay current on credit payments.”
VantageScores is one of the two major credit scoring models used to assess credit risk, along with the Fair Isaac Corporation, or FICO.
Having a low credit score can cost you in a variety of ways, including the interest rate you pay for loans and mortgages, and can even affect where you can live and work.
What’s the big deal about small changes in credit scores?
The average VantageScore remains unchanged, and FICO reported in October that the average score dipped one point, which may not seem like a big deal. But those small shifts can indicate an overall downturn in financial health, according to Leslie Tayne, a financial attorney and CNET Money Expert Review Board member.
“Even small dips in credit scores on a wide scale might suggest that more consumers are struggling to manage their debt effectively, likely because of increased interest rates and persistent inflation impacting their disposable income and ability to save,” she said.
Consumers with higher credit scores can get access to financial products that help them manage their debt, like low-interest personal loans and balance transfer credit cards. Those with less than stellar credit typically don’t get the same advantages as they try to dig out of debt.
“Those who don’t have great credit are subject to higher interest rates and fees, which can create a snowball effect when they don’t have the resources to cover all their expenses and pay down balances,” Tayne said.
What’s a VantageScore?
The three main credit bureaus, Experian, Equifax and TransUnion created VantageScore to help consumers with less credit history establish a credit score. Although the FICO score is more commonly used in credit decisions, VantageScore says it’s used by eight out of the top 10 US banks and more than 3,000 fintech and consumer websites.
FICO scores and VantageScores both have a range from 300 to 850, but they use slightly different data to determine a consumer’s score.
VantageScore’s credit tier ranges are as follows:
| Score range | Credit tier |
| 781 – 850 | Superprime |
| 661 – 780 | Prime |
| 601 – 660 | Near prime |
| 300 – 600 | Subprime |
What can you do if you’re struggling?
If you’ve gotten behind on bills and find yourself struggling with debt, taking action now is essential. Although it can feel overwhelming and even embarrassing, the truth is that even if you do all the “right” things -- like saving an emergency fund and living frugally -- a huge unexpected expense can leave anyone with debt. Give yourself a break.
Although your credit score is important, focusing on getting a handle on your finances should be your first priority:
- Make a budget. Ignoring your problems won’t make them go away. If you don’t already have a budget, create a detailed list of what money you have coming in and where it’s going. Look for places where you can cut back on non-essential expenses, like subscriptions or eating out, while you prioritize paying off debt.
- Prioritize your highest interest debts. If you’re carrying a balance on multiple credit cards, find out the interest rates for each, then focus on putting additional money toward the highest interest card while making the minimum payments on the remaining cards. “This will help you save as much as possible on interest charges, which can cause your balance to spiral out of control,” Tayne said.
- Reach out to lenders. Contact your lenders to explain you’re experiencing financial difficulties and to ask about hardship options. Your credit card company may be able to temporarily lower your interest rate, and your utility company may offer installment payments. Use the reprieve these programs offer to catch up on bills.
- Seek professional help. If managing your debt has become overwhelming, Tayne suggested speaking with a reputable credit counselor who can help you set up a debt management plan. “You can also work with a debt relief attorney to negotiate with creditors and secure a modified payment plan or even a settlement,” she said.
The good news is that the same actions you take to get your finances back on track -- making on-time payments and reducing your credit usage -- can also help raise your credit score.
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