After a decade of steady improvement, the national average credit score inched lower at the end of 2023, raising concerns about the financial health of Americans.

According to credit analytics company FICO, Americans’ national average credit score dipped to 717 in October 2023, down from a high of 718 at the beginning of the year.

The drop seems almost negligible—after all, 717 is still in the “very good” credit score category—but the sheer fact of the first drop in more than a decade is telling.

“It’s a notable milestone,” FICO’s vice president Ethan Dornhelm told CNBC. “This is the first time in well over a decade that the score went down.”

The decline came as credit card utilization increased to 35% from 33% a year earlier, while the share of borrowers who were 30 days past due on their payments jumped to 18% from 16.5%.

According to Dornhelm, Americans are feeling the hangover from the loss of pandemic stimulus, which allowed them to pad their savings.

“Another likely driver is that savings rates have trended back down to zero, and those savings cushions that many consumers had have disappeared,” he explained.

Although Americans as a whole have a decent FICO score, the reality is that more people are falling deeper into debt each month. Economists say that this debt-fueled spending is keeping economic growth artificially high.

Solid growth, but at what cost?

Americans didn’t pare back their spending during the busy holiday season as many had predicted. Instead, they financed their purchases with more borrowed cash.

As the Fed’s consumer credit report showed, Americans borrowed $23.75 billion in November alone, more than double what economists had expected. Meanwhile, total outstanding consumer credit balances breached $5 trillion for the first time.

The borrowing spree continued in December, with total consumer credit increasing by $1.56 billion, Fed data showed.

All that spending helped fuel the U.S. economy to a 3.2% annual growth rate in the fourth quarter, squashing forecasts. Consumer spending, which accounts for roughly 70% of the economy, increased by 3% annually.

The FICO report adds further evidence that much of that consumption-led growth was fueled by expensive, high-interest credit.

“Credit card usage and Buy Now, Pay Later usage seemingly surged during the holidays, on top of already hefty debt loads,” Ted Rossman, Bankrate senior industry analyst, told CNN.

But once the holiday season passed, consumers were left with a hefty credit bill. As Creditnews reported, interest payments on non-mortgage debt reached a record $573.4 billion in January on an annualized basis.

“Increased financial stress”

Payments on high-interest debt are forcing more consumers into a dangerous corner.

A recent report by the New York Fed concluded that many Americans face “increased financial stress” due to higher credit card and auto loan balances.

By the Fed’s calculations, 8.5% of credit card balances and 7.7% of auto loans were delinquent by the end of 2023. And there’s evidence that lower-income households are feeling the biggest burden of all.

According to Boston Fed researchers, poorer Americans are much more reliant on their credit cards, having utilized 80% to 90% of their available credit on average.

“Rising financial stress suggests a weakening in consumption as utilization rates, revolving amounts, and delinquencies continue to rise,” the Fed’s Joanna Stavins wrote.

Lower-income households face a double whammy because they usually have much lower credit scores, which makes the cost of borrowing more expensive.

Data from American Express shows that low-income consumers have an average credit score of 658, well below that of middle-income (735) and high-income (774) earners.

As American Express noted, one possible reason for this is “that lower income may result in a lower ability to pay debts consistently, while higher income may result in a stronger payment history.”