A financial warning bell is ringing across the United States as credit scores fall in all 50 states, signaling widespread economic stress. According to a recent WalletHub report, the national average credit score slipped from 695 in 2023 to 688 in 2024, reflecting a troubling downturn in consumer financial health. For millions of Americans, this dip could mean higher borrowing costs, reduced credit access, and potential difficulties securing jobs or housing.
States Struggling the Most
Some states are being hit harder than others. Alaska tops the list with the steepest drop, seeing its average credit score decline by 1.02%, now standing at 679. Vermont follows closely with a 0.85% decrease, while Mississippi saw a 0.79% dip. The reasons vary but generally include high levels of credit card debt and increased credit utilization, which occur when consumers rely more heavily on credit due to rising living costs.
In contrast, some states saw smaller declines. Maine, Oregon, and Kentucky reported only slight dips of 0.15%, thanks to stronger financial literacy efforts and lower overall debt burdens. While these states have weathered the storm better, the nationwide trend still raises concerns.
What’s Behind the Credit Score Decline?
Experts say a combination of factors is driving the decline:
- Rising Debt: With inflation continuing to drive up the cost of living, many households have turned to credit cards to cover everyday expenses. However, relying too heavily on credit leads to higher balances and, eventually, a drop in credit scores.
- Missed Payments: As more families struggle to make ends meet, late payments on loans, mortgages, and credit cards have increased. Payment history is a major factor in determining credit scores, so even a few missed payments can cause significant damage.
- Higher Interest Rates: As interest rates rise, monthly payments on existing debts also go up. For families on tight budgets, this can quickly spiral into financial trouble.
Why Credit Scores Matter
Credit scores play a crucial role in determining a person’s financial options. A lower score can mean higher interest rates on loans and credit cards, making it more expensive to borrow money. It can also limit access to new credit, affecting a person’s ability to buy a home, finance a car, or handle emergency expenses. In some cases, employers and landlords check credit scores, meaning a decline could even impact job opportunities or housing options.
Steps You Can Take to Improve Your Credit
If you’ve noticed your credit score dropping, don’t panic. There are steps you can take to get back on track:
- Pay Bills on Time: Late payments can have a significant impact on your score, so always aim to meet deadlines.
- Check Your Credit Report: Errors and inaccuracies can drag down your score, so review your report regularly through free credit monitoring services.
- Lower Your Credit Card Balances: Try to keep your credit utilization below 30% of your total limit.
- Limit New Credit Applications: Applying for too much new credit at once can hurt your score due to hard inquiries on your credit report.
Although the current decline in credit scores is concerning, experts emphasize that it’s not irreversible. With proactive steps, consumers can regain control and improve their financial outlook.
