Chart of the Week: What's the relationship between credit card balances and credit scores?

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Nov 20, 2019
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Chart of the Week, Credit Cards, Credit Scores

 

Questions:

  • Those with _______________ credit scores have the highest credit card balances while those with ______________ credit scores have the lowest credit card balances. 
  • What has been the overall trend with credit card balances for all credit scores since 2011? 
  • Do you think that taking out more credit on a credit card is a sign of consumer optimism or pessimism? 
  • Consumers with Exceptional credit scores have average credit card balances similar to those with Very Poor credit scores (bottom two lines). Can you explain why you think this is the case? 

Behind the numbers (Experian): 

When looking at the average credit card balances by FICO® Score ranges, you can see the same steady trend of growth over the past five years. The average balance for those with FICO® Scores considered very poor (300-579) has grown 27% in the past five years, the largest gain among the ranges. FICO® Scores considered exceptional (800-850), have grown 26% in the past 10 years, the largest gain in that time period among the different ranges.

"While credit card balance information is considered by FICO® Scores, the ratio of an individual's credit card balances to their credit limits is generally weighted more heavily," says Tom Quinn at FICO. "FICO® Scores tend to reward people using a lower percentage of their available credit and paying their bills on time."

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Want to know what the latest credit score trends are? Check out this FinCap Friday: How To Get Extra Credit

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.