FICO Fact: You can have no debt and a high credit score!

Many know that higher credit scores and an on-time payment history can help them gain access to credit, with more favorable terms and lower interest rates from lenders. Do individuals need to have debt to have a high credit score? The simple answer is no. People with no debt can have a high FICO® Score. Let's review the FICO Facts to understand how lack of debt impacts the credit score.

A common myth about the FICO® Score is that it requires people to have high levels of debt to have a high credit score. This is simply not true. In fact, in our research on a representative sample of millions of individuals from April 2023, we found that the average FICO Score in the United States for people with no current debt was 737, which is almost 20 points higher than the national average of 718. As seen in figure 1, more than 80% of people who have no amounts owed on their credit reports have a FICO Score higher than 700. Approximately 4% of the scorable population has no credit utilization, meaning there are roughly 7 million Americans with no debt and a credit score greater than 700.

Figure 1: April 2023 FICO® Score 8 distribution of individuals with total account balances = 0

FICO® Scores are calculated based on analysis of the credit history data of millions of people, and that analysis has shown time and again that those with no debt found on their credit report are better than average credit risks.

Note that "amounts owed" to creditors is just one of the five categories of the FICO® Score calculation, consisting of roughly 30% of the score calculation. Whether individuals with no debt have a high credit score also depends on the other factors in their credit report, such as their payment history, length of credit history, applications for new credit, and credit mix. Ultimately, paying off credit cards and other balances and carrying no debt does not prevent someone from having a high credit score.

As mentioned previously, more than 80% of people with no debt currently on their credit report receive a FICO® Score of 700 or above. In the event any of these individuals decide they need access to more credit, they may find that their credit score of 700+ enables them to qualify for new credit at favorable terms.

To learn more about what people and credit lenders need to know about the FICO® Scores widely-used in lending decisions and understand how lenders evaluate credit risk for loans and other credit with FICO® Scores, check out the FICO fact sheet Understanding Your FICO® ScoresUnderstanding Your FICO® Scores

Every year, lenders access FICO® Scores to help them understand customers credit risk and make better-informed credit lending decisions. By providing creditors with a fast, reliable, and objective measure of credit risk, FICO Scores have made the lending process faster and fairer - helping millions of credit-ready borrowers improve their understanding of financial health, secure better interest rates, and get access to the credit they deserve. Understanding the FICO® Score is a vital part of understanding credit health as the score can influence credit approvals and terms.