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For the First Time in Ten Years, Credit Scores Decline as Americans Face Challenges in Saving and Maintaining Payments

Credit scores have declined for the first time in over a decade, as consumers face difficulties in making timely payments and saving money, according to a report from FICO. Ethan Dornhelm, FICO's vice president of scores and predictive analytics, highlighted the significance of this downturn, attributing it partly to reduced savings rates and the depletion of savings cushions that many consumers once had.

The national average FICO® Score remained stable at 718 from April to July 2023 but dropped to 717 by October 2023. This decline suggests that high interest rates and persistent inflation are beginning to impact consumers, particularly those already struggling with financial management. The report also noted an increase in missed borrower payments and consumer debt levels as contributing factors to the falling credit scores.

The end of pandemic-era relief programs means consumers are now facing the full weight of their credit obligations without the support of stimulus checks or government-defined accommodation programs. A study by Assurance IQ revealed that 66% of U.S. adults had to make sacrifices to cover their monthly bills in the past year, with borrowing money or using credit cards being the most common strategies. Lower-income households, especially those earning less than $75,000, were more likely to resort to borrowing funds to manage their expenses. Read More.

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Survey Results: Economists Predict a 59% Probability of Recession by July 2024

Despite avoiding a recession in 2023, economists still believe a downturn is likely in the near future. According to Bankrate's quarterly survey, experts estimate a 59% chance of a recession between now and July 2024, indicating a 3-in-5 probability of an economic environment characterized by job loss, slower business growth, and a tougher stock market. A majority (78%) of respondents believe the likelihood of a recession is greater than 50%, with 28% estimating the odds at 70% or higher.

However, economists generally agree that the anticipated recession is unlikely to be as severe as the coronavirus pandemic or the Great Recession. The Federal Reserve's aggressive interest rate hikes, aimed at controlling inflation, have historically been associated with economic downturns. While the economy has shown signs of slowing and banks have tightened lending standards, consumer spending and the labor market have remained resilient.

The current odds of a recession are the lowest since the second quarter of 2022 when economists predicted a 52% chance of a downturn. The Fed's rate hikes have exceeded initial expectations, raising concerns about the economy's ability to withstand such tightening. Experts predict a mild recession starting in late 2023 or early 2024, with factors like the Social Security cost-of-living adjustment, the reopening of China's economy, and the resilience of the labor market delaying its onset. However, these tailwinds are fading, and restrictive monetary policy is expected to lead to at least a mild downturn by the end of the year. Read More.