FICO Study Finds Score Changes in Top and Bottom Ranges

FICO, the company that invented the credit score, recently conducted a study on credit score changes.  The study was conducted using consumer credit profiles from Equifax, one of the three major consumer credit bureaus, as of October 2011.  The scores were compared from 2005 to 2011.   The top FICO score range of 800 to 850 was the highest proportion since October 2008, but those in the score range of 700 to 799 still have not reached pre-recession levels.  Those is the lowest FICO score range of 300 to 549 were the lowest proportion since 2006.

Score distribution

Here is the breakdown of the scores:

Score range 800 to 850 was 18 percent of those with scores, which was the highest proportion since October 2008.

Score range of 750 to 799 was 19 percent of those with scores, which was the lowest proportion since April 2009.

Score range of 700 to 740 was 16 percent of those with scores, which was the lowest proportion since 2005.

Score range of 550 to 699 was 32 percent of those with scores, which was the largest proportion since 2006.

Score range of 300 to 549 was 15 percent of those with scores, which was the lowest proportion since 2006.

According to FICO

”There has been a clear shift,” said Rachel Bell of FICO Labs. “Many consumers have moved into the top tier of the FICO® Score range by redoubling their efforts to maintain an excellent credit profile. Other people have fallen into lower tiers, most likely due to the financial stress that many households have been feeling. Despite this shift, we continue to observe more than half of FICO® Scores in the U.S. are between 700 to 850, which means Americans have managed their credit well despite the economic downturn.”

“One possible explanation for the decrease in the number of consumers in the very bottom tier of the FICO Score range is that lenders have written off a lot of bad debt and closed the riskiest credit accounts,” said Bell. “Some consumers who had multiple bad debts and delinquencies a few years ago are now able to move on, and their credit scores are starting to move into the 550 to 699 range.”

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More than half of consumers — 53.2 percent — still had credit scores over 700. That’s down from 54 percent in 2006 and 2007, before the full impact of the credit crisis. This study suggests that the gloom and doom perception about credit scores falling off the table because of the economy simply isn’t true.