MW A warning for all Americans - this is not a good time to put things on credit

By Quentin Fottrell

Economists worry about tariff-induced price hikes, inflation, interest rates and the outlook for the job market

Changes are coming to your credit score.

As economists worry about tariff-induced price hikes, inflation, rising interest rates and the outlook for the job market, FICO recently announced it will introduce buy-now-pay-later loan data into its credit-scoring models; it's scheduled to happen in the fall of 2025. "BNPL loans are playing an increasingly important role in consumers' financial lives," Julie May, vice president and general manager of B2B Scores at FICO, said. "We're enabling lenders to more accurately evaluate credit readiness, especially for consumers whose first credit experience is through BNPL."

Buy-now-pay-later services like Uplift, Affirm, Uplift and Klarna have become increasingly tempting for cash-strapped consumers. Customers are often presented with the option at checkout, usually with the total broken into four payments with no interest. Tempting, isn't it? In fact, 15% of people said last year that they'd used buy-now-pay-later in the previous 12 months, according to a Federal Reserve survey, up from 14% in 2023 and 10% in 2021, when the Fed survey first asked about the option. Other polls put that figure at over 40%.

Shoppers are concerned about the economy, and they have reason to be. Consumer confidence declined last month.

This is not a good time to put things on credit, but a high credit score will lower your cost of borrowing and help you qualify in the first place. The average credit score is 715 - considered "good," Experian says. Some 21% of consumers have a "good" credit score (670 to 739), while 27.8% have a "very good" credit score (740 to 799) and 22.5% have an exceptional credit score (800 to 850). Some 13.2% of consumers have a "poor" credit score (300 to 579) and 15.5% have a "fair" credit score (580 to 669). It could be a lot worse, but it's still an uncertain time for the U.S. consumer.

Shoppers are concerned about the economy, and they have reason to be. Consumer confidence declined last month, dropping to 93 from 98.4 in the previous month, according to the Conference Board's index. Personal consumption in May surprised analysts, falling by 0.1% after a 0.2% gain in April. Yes, credit scores are a less-than-perfect way of measuring a person's financial health. After all, what if you had a $10 million home or a $1 million IRA? The truth is the net worth of the average American is over $1 million. But the median net worth is closer to $190,000.

"The share of people 30 days delinquent on their credit-card debt has trended upward since the first half of 2021," according to a recent report by the St. Louis Fed, although the upward trend has slowed somewhat since 2024. "The trend is more notable in the lowest-income 10% of ZIP codes than it is in the highest-income 10% of ZIP codes: From the second quarter of 2021 to the first quarter of 2025, their delinquency rates grew by 63% and 44%, respectively, in relative terms."

Don't miss: I'm saving 100% on Amazon Prime Day - and you can too

Tools of the trade

I recently received a letter to my Moneyist column about credit scores. The reader wrote, "I love playing around with my credit score. Over the last 15 years or so, I've been using all kinds of different 'strategies' to tweak the score. It's fairly easy to do, assuming you have the cash/income to adjust balances on credit-card accounts. I don't really care about the score unless I need to get loans for certain projects or purchases. I find that it's fairly easy to boost my score at the time it's relevant."

Here's my takeaway regarding FICO and that letter: Treat your credit score with the respect you would give a lover who needs a little love and care - that is, not every now and then but consistently, whether or not you have your eye on an attractive interest rate. Treating your credit score this way is preferable to employing "tricks." It promotes and encourages fiscally responsible behavior and, over time, good habits. Maintaining a high credit score over time is one hallmark of a responsible consumer.

Good habits are better than 11th-hour strategies - and you can't gaslight credit-scoring companies into believing you're a good bet when your track record says otherwise. Those habits include keeping your balance low relative to your limit, paying your credit-card and utility bills on time and making sure the gym that you joined but never attended doesn't send debt collectors after you. Those are examples pulled out of a hat, but they're not so far-fetched, and they give you an idea of what the credit-score gods are looking for.

You can't gaslight credit-scoring companies into believing you're a good bet when your track record says otherwise.

Worryingly, more people are using buy-now-pay-later to purchase essentials like groceries. In a survey released last month, LendingTree found that 25% of buy-now-pay-later users said they've used the loans to buy groceries, up from 14% just a year ago amid rising prices at the supermarket and elsewhere. What's more, one-third of Generation Z members who use this option say they've done so to buy groceries, making it their fourth-most common buy-now-pay-later purchase after clothing, technology and home decor.

On the upside, U.S. Bank Wealth Management notes that "gloomy consumer sentiment" doesn't necessarily lead to an actual negative economic outcome, even if consumers do face several key challenges, including elevated interest rate and rising prices. Consumers "increasingly rely" on borrowing to finance their purchases, it adds, although credit-card balances fell by $29 billion from the previous quarter to reach $1.18 trillion in the first quarter, according to the Federal Reserve.

Here are some tools for maintaining a high credit score: Take the time to actually read your credit report for any red flags that might be weighing on your score (unpaid bills that could, for instance, be going to an old address). Some other rules of thumb: The older your credit, the better risk you are for lenders, so if you need to cancel a card, always cancel your newest one first. Finally, prioritize canceling cards that have hefty annual fees. If you're not using the card, there's no point in paying the fee.

Don't miss: We're living in 'end times' when you can't retire on $1 million

Juggling too many cards

The three main credit bureaus - Equifax (EFX) , TransUnion $(TRU.UK)$ and Experian (UK:EXPN) - calculate their scores slightly differently, so a consumer's score could be dinged differently depending on the bureau. For instance, a FICO score has five categories: payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%) and credit mix (10%). Like all credit bureaus, FICO values consumers who stay on top of their finances.

There are examples of good practice if you plan on taking out a large personal loan or mortgage. Say you have too many cards and you're tired of managing them. If you already have a mortgage and you don't intend to take out a personal loan in the next six months or so, it might be a good time to rid yourself of these cards once and for all, once you have made sure that there is no balance on them and that you have redeemed any points.

This is not a good time to put things on credit, live the high life and treat your credit score like an afterthought.

"Each time you apply for a credit card, a credit inquiry is added to your credit report," FICO says. "Although these credit inquiries don't usually significantly hurt your FICO score, they can lower it. Especially if you have many credit inquiries within a year. For that reason, consolidating your current balances to one card instead of two would be better. Credit inquiries can lower your score because people who are actively seeking credit have been proven to pose more risk to lenders than people who are not seeking credit."

I'm not a fan of juggling a lot of credit cards. They come with points, sure, but many also come with fees - and there's always the risk of losing them or falling victim to a fraudster. I'm also not a proponent of opening cards for $100 bonuses only to close them afterwards. That's gaming the system and it ends up costing the credit-card companies money - and those costs are ultimately passed on to the consumer. Opening and closing credit cards can also damage your credit score, per this warning from FICO $(FICO)$.

What does it all mean? Unexpected life events such as job loss or an emergency can throw your finances into turmoil. The health of Americans' finances, as seen through their broader economic backdrop, is not pretty. Consumer prices in June posted the biggest rise so far this year, the government said Tuesday, with inflation hitting 2.7% in June from 2.4% the prior month. These figures, economists say, are likely to deter the Federal Reserve from reducing interest rates later this month.

We live in uncertain times. Trim your credit-card debt. Don't take your credit score for granted, and don't play games with it, either.

Previous columns by Quentin Fottrell:

Is now a good time to buy an iPhone?

Recession signs are out of control. When will it end?

What on Earth is going on with the American consumer?

You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on X, the platform formerly known as Twitter.

The Moneyist regrets he cannot reply to questions individually.

Check out the Moneyist's private Facebook group, where members help answer life's thorniest money issues. Post your questions, or weigh in on the latest Moneyist columns.

By emailing your questions to the Moneyist or posting your dilemmas on the Moneyist Facebook group, you agree to have them published anonymously on MarketWatch.

MW A warning for all Americans - this is not a good time to put things on credit

By Quentin Fottrell

Economists worry about tariff-induced price hikes, inflation, interest rates and the outlook for the job market

Changes are coming to your credit score.

As economists worry about tariff-induced price hikes, inflation, rising interest rates and the outlook for the job market, FICO recently announced it will introduce buy-now-pay-later loan data into its credit-scoring models; it's scheduled to happen in the fall of 2025. "BNPL loans are playing an increasingly important role in consumers' financial lives," Julie May, vice president and general manager of B2B Scores at FICO, said. "We're enabling lenders to more accurately evaluate credit readiness, especially for consumers whose first credit experience is through BNPL."

Buy-now-pay-later services like Uplift, Affirm, Uplift and Klarna have become increasingly tempting for cash-strapped consumers. Customers are often presented with the option at checkout, usually with the total broken into four payments with no interest. Tempting, isn't it? In fact, 15% of people said last year that they'd used buy-now-pay-later in the previous 12 months, according to a Federal Reserve survey, up from 14% in 2023 and 10% in 2021, when the Fed survey first asked about the option. Other polls put that figure at over 40%.

Shoppers are concerned about the economy, and they have reason to be. Consumer confidence declined last month.

This is not a good time to put things on credit, but a high credit score will lower your cost of borrowing and help you qualify in the first place. The average credit score is 715 - considered "good," Experian says. Some 21% of consumers have a "good" credit score (670 to 739), while 27.8% have a "very good" credit score (740 to 799) and 22.5% have an exceptional credit score (800 to 850). Some 13.2% of consumers have a "poor" credit score (300 to 579) and 15.5% have a "fair" credit score (580 to 669). It could be a lot worse, but it's still an uncertain time for the U.S. consumer.

Shoppers are concerned about the economy, and they have reason to be. Consumer confidence declined last month, dropping to 93 from 98.4 in the previous month, according to the Conference Board's index. Personal consumption in May surprised analysts, falling by 0.1% after a 0.2% gain in April. Yes, credit scores are a less-than-perfect way of measuring a person's financial health. After all, what if you had a $10 million home or a $1 million IRA? The truth is the net worth of the average American is over $1 million. But the median net worth is closer to $190,000.

"The share of people 30 days delinquent on their credit-card debt has trended upward since the first half of 2021," according to a recent report by the St. Louis Fed, although the upward trend has slowed somewhat since 2024. "The trend is more notable in the lowest-income 10% of ZIP codes than it is in the highest-income 10% of ZIP codes: From the second quarter of 2021 to the first quarter of 2025, their delinquency rates grew by 63% and 44%, respectively, in relative terms."

Don't miss: I'm saving 100% on Amazon Prime Day - and you can too

Tools of the trade

I recently received a letter to my Moneyist column about credit scores. The reader wrote, "I love playing around with my credit score. Over the last 15 years or so, I've been using all kinds of different 'strategies' to tweak the score. It's fairly easy to do, assuming you have the cash/income to adjust balances on credit-card accounts. I don't really care about the score unless I need to get loans for certain projects or purchases. I find that it's fairly easy to boost my score at the time it's relevant."

Here's my takeaway regarding FICO and that letter: Treat your credit score with the respect you would give a lover who needs a little love and care - that is, not every now and then but consistently, whether or not you have your eye on an attractive interest rate. Treating your credit score this way is preferable to employing "tricks." It promotes and encourages fiscally responsible behavior and, over time, good habits. Maintaining a high credit score over time is one hallmark of a responsible consumer.

Good habits are better than 11th-hour strategies - and you can't gaslight credit-scoring companies into believing you're a good bet when your track record says otherwise. Those habits include keeping your balance low relative to your limit, paying your credit-card and utility bills on time and making sure the gym that you joined but never attended doesn't send debt collectors after you. Those are examples pulled out of a hat, but they're not so far-fetched, and they give you an idea of what the credit-score gods are looking for.

You can't gaslight credit-scoring companies into believing you're a good bet when your track record says otherwise.

Worryingly, more people are using buy-now-pay-later to purchase essentials like groceries. In a survey released last month, LendingTree found that 25% of buy-now-pay-later users said they've used the loans to buy groceries, up from 14% just a year ago amid rising prices at the supermarket and elsewhere. What's more, one-third of Generation Z members who use this option say they've done so to buy groceries, making it their fourth-most common buy-now-pay-later purchase after clothing, technology and home decor.

On the upside, U.S. Bank Wealth Management notes that "gloomy consumer sentiment" doesn't necessarily lead to an actual negative economic outcome, even if consumers do face several key challenges, including elevated interest rate and rising prices. Consumers "increasingly rely" on borrowing to finance their purchases, it adds, although credit-card balances fell by $29 billion from the previous quarter to reach $1.18 trillion in the first quarter, according to the Federal Reserve.

Here are some tools for maintaining a high credit score: Take the time to actually read your credit report for any red flags that might be weighing on your score (unpaid bills that could, for instance, be going to an old address). Some other rules of thumb: The older your credit, the better risk you are for lenders, so if you need to cancel a card, always cancel your newest one first. Finally, prioritize canceling cards that have hefty annual fees. If you're not using the card, there's no point in paying the fee.

Don't miss: We're living in 'end times' when you can't retire on $1 million

Juggling too many cards

The three main credit bureaus - Equifax (EFX) , TransUnion $(TRU.AU)$ and Experian (UK:EXPN) - calculate their scores slightly differently, so a consumer's score could be dinged differently depending on the bureau. For instance, a FICO score has five categories: payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%) and credit mix (10%). Like all credit bureaus, FICO values consumers who stay on top of their finances.

There are examples of good practice if you plan on taking out a large personal loan or mortgage. Say you have too many cards and you're tired of managing them. If you already have a mortgage and you don't intend to take out a personal loan in the next six months or so, it might be a good time to rid yourself of these cards once and for all, once you have made sure that there is no balance on them and that you have redeemed any points.

This is not a good time to put things on credit, live the high life and treat your credit score like an afterthought.

"Each time you apply for a credit card, a credit inquiry is added to your credit report," FICO says. "Although these credit inquiries don't usually significantly hurt your FICO score, they can lower it. Especially if you have many credit inquiries within a year. For that reason, consolidating your current balances to one card instead of two would be better. Credit inquiries can lower your score because people who are actively seeking credit have been proven to pose more risk to lenders than people who are not seeking credit."

I'm not a fan of juggling a lot of credit cards. They come with points, sure, but many also come with fees - and there's always the risk of losing them or falling victim to a fraudster. I'm also not a proponent of opening cards for $100 bonuses only to close them afterwards. That's gaming the system and it ends up costing the credit-card companies money - and those costs are ultimately passed on to the consumer. Opening and closing credit cards can also damage your credit score, per this warning from FICO (FICO).

What does it all mean? Unexpected life events such as job loss or an emergency can throw your finances into turmoil. The health of Americans' finances, as seen through their broader economic backdrop, is not pretty. Consumer prices in June posted the biggest rise so far this year, the government said Tuesday, with inflation hitting 2.7% in June from 2.4% the prior month. These figures, economists say, are likely to deter the Federal Reserve from reducing interest rates later this month.

We live in uncertain times. Trim your credit-card debt. Don't take your credit score for granted, and don't play games with it, either.

Previous columns by Quentin Fottrell:

Is now a good time to buy an iPhone?

Recession signs are out of control. When will it end?

What on Earth is going on with the American consumer?

You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on X, the platform formerly known as Twitter.

The Moneyist regrets he cannot reply to questions individually.

Check out the Moneyist's private Facebook group, where members help answer life's thorniest money issues. Post your questions, or weigh in on the latest Moneyist columns.

By emailing your questions to the Moneyist or posting your dilemmas on the Moneyist Facebook group, you agree to have them published anonymously on MarketWatch.

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July 16, 2025 12:31 ET (16:31 GMT)

MW A warning for all Americans - this is not a -2-

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