Consumer debt is rising, and now credit scores have declined.

The national average FICO credit score dropped to 715 from 717, according to a recent report from FICO, developer of one of the scores most widely used by lenders. FICO scores range between 300 and 850.

Amid high interest rates and rising debt loads, the share of consumers who fell behind on their payments jumped over the past year, FICO found. Also, the resumption of federal student loan delinquency reporting on consumers’ credit was a significant contributing factor, the report said.

“Those are now being reported for the first time since March 2020,” said Tommy Lee, senior director of scores and predictive analytics at FICO. “This is really driving the increase in severe delinquencies.”

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The Federal Reserve Bank of New York cautioned in a March report that student loan borrowers who are late on their payments would experience “significant drops” in their credit scores.

Initially, those borrowers benefitted from the pandemic-era forbearance on federal student loans, which marked all delinquent loans as current. Median credit scores for student loan borrowers increased by 11 points between the end of 2019 to the end of 2020, the Fed researchers found. However, that relief period officially ended on Sept. 30, 2024.

“We expect to see more than nine million student loan borrowers face substantial declines in credit standing over the first quarter of 2025,” the Fed researchers wrote in the blog post last month.

“Although some of these borrowers may be able to cure their delinquencies,” the Fed researchers said, “the damage to their credit standing will have already been done and will remain on their credit reports for seven years.”

Lower credit scores could result in reduced credit limits, higher interest rates for new loans and overall lower credit access, the researchers also said.

During the 2007-2010 housing crisis, average nationwide credit scores fell to 686 due to a surge in foreclosures. They subsequently ticked higher until the Covid-19 pandemic, when government stimulus programs and a spike in household saving helped boost scores to a historic high of 718 in 2023.

However, last year, FICO scores notched their first decline in over a decade, dropping to 717 in 2024, when rising credit card balances and an uptick in missed payments started to take a toll.

This year, scores fell even further as severe delinquencies, or 90-day past-due missed payments, surpassed pre-pandemic levels for the first time.

In general, the higher your credit score, the better off you are when it comes to getting a loan. Lenders are more likely to approve you for loans when you have a higher credit score, or offer you a better rate. Alternatively, borrowers with lower scores are typically charged more in interest, if they are approved for a loan at all.

In fact, increasing your credit score to very good (740 to 799) from fair (580 to 669) could save you more than $39,000 over the lifetime of your balances, a recent analysis by LendingTree found — with the largest impact from lower mortgage costs, followed by preferred rates on credit cards, auto loans and personal loans.

Some of the best ways to improve your credit score come down to paying your bills on time every month and keeping your utilization rate, or the ratio of debt to total credit, below 30% to limit the effect that high balances can have, FICO’s Lee said.

A good score generally is above 670, a very good score is over 740 and anything above 800 is considered exceptional.

An average score of 715 by FICO measurements means most lenders will consider your creditworthiness “good” and are more likely to extend lower rates.

“There are still many consumers that are managing their payments very well,” Lee said. “On the other hand, the decline [in average credit scores] does indicate there are some consumers being impacted by the current economy.”

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Megan Moritz bought her dream house in 2019.

However, the 1,400-square-foot home, in the Arlington Heights suburb northwest of Chicago, was built in the 1930s and lacked insulation — leading to heating bills that were “very high,” said Moritz, 48.

The first-time homeowner opted to pay about $5,700 for a series of projects last year to make her home more energy-efficient. She added insulation to the walls, and sealed gaps in ductwork connected to her furnace to prevent air leaks.

Moritz shaved her gas heating bill by half or more during the winter months, and her home is now “delightfully toasty,” she said. She slashed her bill to $102 in December 2024 from $311 two years earlier, records show. In January 2025, her bill was $116, down from $288 in 2023.

Moritz also received a $1,200 federal tax break when she filed her tax return this year, according to records reviewed by CNBC. She’s among millions of homeowners who claim a tax credit each year for retrofits tied to energy efficiency.

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“The biggest perk to me, honestly, was not freezing my butt off,” said Moritz, who works for a global professional association. “Then it was the monthly bill going down as much as it did.”

“The tax credit was a nice little perk, the cherry on top,” she said.

The tax break, however, may not be available for much longer.

Republicans have signaled an intent to put the tax break and other consumer financial incentives linked to the Inflation Reduction Act on the chopping block to raise money for a multi-trillion-dollar package of tax cuts being negotiated on Capitol Hill.

The tax break — the energy efficient home improvement credit, also known as the 25C credit — is worth up to 30% of the cost of a qualifying project.

Taxpayers can claim up to $3,200 per year on their tax returns, with the overall dollar amount tied to specific projects.

They can get up to $2,000 for installing a heat pump, heat pump water heater or biomass stove/boiler, and another $1,200 for other additions like efficient air conditioners, efficient windows and doors, insulation and air sealing.

About 2.3 million taxpayers claimed the credit on their 2023 tax returns, according to Internal Revenue Service data.

The average family claimed about $880, according to the Treasury Department.

Kennedy, 38, had fiberglass insulation installed in his attic and air-sealed his 3,700-square-foot home in March, a project that cost just over $6,000 after state and local rebates.

A federal tax break would reduce his net cost to about $5,000, Kennedy expects.

“I think it would’ve been a much harder decision to do it” without tax credits, said Kennedy, a real estate agent.

The tax break has been available on-and-off since Congress passed the Federal Energy Tax Act of 1978, according to a paper by Severin Borenstein and Lucas Davis, economists at the Haas Energy Institute at the University of California, Berkeley.

The original rationale for the credit was to boost U.S. energy security following energy crises in the 1970s, they wrote.

Today, the main goal of the tax break is to mitigate climate change, Davis said in an interview.

Making homes more energy-efficient helps reduce their planet-warming greenhouse gas emissions. Residential energy use accounts for about 20% of U.S. greenhouse gas emissions, according to researchers in the School for Environment and Sustainability at the University of Michigan.

The Inflation Reduction Act — a historic law to combat climate change, signed by former President Joe Biden in 2022 — extended the tax break through 2032 and made it more generous. Biden-era Treasury officials said the tax break was more popular than expected.

“A lot of these clean-energy technologies have significant benefits, but they can tend to cost a bit more than the alternative,” Davis said. “This [tax] credit offers an incentive to spend a little bit more for a capital investment that will yield climate benefits.”

Households can only claim the tax credit if they have an annual tax liability, since the credit is nonrefundable. Most of the benefits accrue to higher-income households, which are more likely to have a tax liability, Davis said.

The IRA also included many other consumer tax breaks and financial incentives tied to electric vehicles, rooftop solar panels and energy efficiency.

Republicans in Congress may claw back funding as part of a forthcoming tax-cut package expected to cost at least $4 trillion, experts said. President Donald Trump pledged to gut IRA funding on the campaign trail, and Republicans voted more than 50 times in the House of Representatives to repeal parts of the law.

“Absolutely, there is a risk in the current budget bill that these credits would be changed or go away completely,” Davis said.

However, there’s a group of Republicans in the House and Senate seeking to preserve the tax breaks. Their support could be enough to save the incentives, given slim margins in each chamber.

About 85% of the clean-energy investments and 68% of jobs tied to Inflation Reduction Act funding are in Republican congressional districts, according to a 2024 study by E2.

Investors may feel an impulse to move to cash amid the recent tumult in the stock market. While cash might feel safer than stocks, it can also pose risks for long-term savers, financial advisors say.

Cash — like money held in a high-yield bank savings account or a money market fund — is substantially less volatile than stocks over the short term, experts said.

But cash has historically delivered lower returns than stocks over the long term. Holding on to more cash than you need — rather than investing it — raises the risk that you may not achieve your investing goals.

The upshot: Cash-heavy investors may find it challenging to achieve their long-term investment goals, and may have to save more of their discretionary income as a result, Vanguard wrote in a paper that analyzed stock and cash returns.

Investors fled stocks for perceived safe havens as U.S. stock benchmarks were whipsawed by tariff and trade proclamations from the Trump administration and retaliatory measures announced by major trade partners like China.

Following a White House announcement of country-specific tariffs earlier this month, the S&P 500 had its worst two-day stretch since the early days of the Covid-19 pandemic, losing about 11%.

Meanwhile, April 7 saw the highest volume of 401(k) plan trading since March 12, 2020, according to Alight Solutions, a retirement plan administrator. About 94% of proceeds moved to conservative assets like money market, bond and stable-value funds, according to Alight.

“Everyone should have some cash and some equities,” McClanahan, a member of CNBC’s Financial Advisor Council, wrote in an e-mail.

But cash “has a long history” of offering negative “real” returns, meaning returns after accounting for inflation, according to Morningstar.

In other words, consumers who hold a portfolio that’s 100% in cash actually lose wealth over time after accounting for inflation, experts said. If interest rates on cash don’t keep pace with rising prices, consumers lose purchasing power.

Meanwhile, stocks have the potential for high growth, especially over the long term, but also come with risks, McClanahan said.

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“The ups and downs of the markets can be nauseating, and you might have to bank losses if you need your money and can’t ride out market downturns,” McClanahan said.

“Every portfolio should be diversified across safe and risky assets based on the client’s financial and psychological ability to take risk,” she wrote.

People in or near retirement, when they will need to start withdrawing money from their portfolio, should hold enough money in cash, short-term bonds and certificates of deposit to fund five years of income needs, plus any upcoming major purchases, McClanahan said.

The rest should be in a diversified portfolio of fixed income and stocks, she said.

Even retirees generally need to allocate some of their portfolio to stocks: They may lean on their portfolios to fund their lifestyle over three or more decades, meaning some investment growth is necessary to avoid running out of money, according to experts.

All investors should have an investment strategy that spells out “how much they will have allocated to equities, fixed income [bonds], and cash and they should stick with this investment policy through all markets, good and bad,” McClanahan wrote in an e-mail.