In honor of National Credit Education Month, the ABA Foundation is hosting an article series to spotlight strategies, tools and best practices to help consumers navigate credit challenges with confidence. Each week, a partner organization will share insights grounded in their expertise on how banks can strengthen credit resilience from rebuilding credit to managing debt. Here is the first installment.
By Rukiya Kelly
Global head of corporate impact at FICO
The most recent FICO Score Credit Insights Report notes that the national average FICO Score is 715, down two points year over year. The report attributes the change primarily to higher credit card utilization and an increase in missed payments.
These shifts reflect financial pressure for many households and reinforce a core feature of credit scoring: Scores can change as credit behavior changes. FICO Scores are calculated using five key categories: payment history, amounts owed, length of credit history, new credit and credit mix. Payment history is the most key factor in a FICO Score. After a period of financial hardship, establishing a pattern of on-time payments is one of the most important steps a consumer can take to support credit recovery.
Negative information such as late payments may remain on a credit report for a period of time, but its influence on a FICO Score generally decreases over time, especially as new positive information is reported. Consistent, on-time payments can help demonstrate responsible credit management and support longer-term improvement.
Amounts owed, including credit utilization, are another significant component. Credit utilization reflects how much of a consumer’s available revolving credit is being used. Higher utilization may be associated with lower scores, and changes in balances can be reflected as updated information is reported. The Credit Insights Report highlights increasing utilization as one driver of recent score movement, which makes revolving balance management an important part of many consumers’ rebuilding efforts.
For consumers rebuilding after more significant credit events, establishing new positive credit activity may be part of the process. Secured credit cards and other credit-building tools can provide a structured way to demonstrate responsible use. FICO also notes that carrying a balance from month to month does not improve a score. Paying balances on time and keeping revolving balances at manageable levels can help support a healthier credit profile.
Reviewing credit reports for accuracy is also important. Consumers should ensure reported information is complete and correct and address any inaccuracies through the appropriate channels. Monitoring credit reports and FICO Scores can also help consumers understand the factors influencing their score over time.
Credit rebuilding is not instantaneous. FICO scoring models are designed to be dynamic, reflecting both recent behavior and longer-term patterns. The Credit Insights Report also notes greater score volatility among younger consumers, underscoring how early credit experiences can influence future outcomes.
Credit rebuilding is closely connected to financial literacy and financial resilience. When consumers understand how key score factors work, they are better positioned to make informed credit decisions.
For financial institutions, combining clear education with responsible products and transparent customer support can help consumers navigate recovery while also supporting sustainable credit performance.
This article is for educational purposes and does not constitute financial advice.
