Compared to last year, 1.4 million fewer people are now in the lowest FICO scoring range (300-549), according to new report from FICO. By that same token, consumers boasting a perfect or nearly perfect credit score (800-850), has increased by 1.4 million people since 2010.
This likely due to two main reasons:
- Consumers became more cautious. As consumers grappled with a recession and high debt loads, many buckled down on their spending and began to pay back their debt. Over time, this helped consumers increase their credit scores.
- Consumers with low credit scores were essentially cut off from access to credit when the recession hit. Not only did lenders shut down their credit lines but denied them access to new credit as well. As a result, the number of consumers with poor scores decreased because when their credit lines were cut off, they no longer had any credit data being reported to FICO, so FICO stopped generating new credit scores for them.
Are you one of the 14.2 percent of American’s with a low credit score? You can improve it.
“There are five main factors that impact a person’s credit score including their credit utilization, on time payments, the length of a person’s credit history, the number of hard inquiries on an account and the number/type of credit a consumer has,” said Adrian Nazari, CEO of Credit Sesame.
“The first three listed account for the overwhelming majority (percentage wise) of what makes up your credit score,” said Nazari. “Pay your bills on time. Don’t use more than 10 percent of your available credit and keep your balances low. Don’t apply for new credit if it’s not likely you’ll get approved. This can cause your credit score to take an even deeper hit.”
Credit Sesame is a free online personal finance tool that gives consumers an easy way to monitor and manage their credit and loans all in one place and save money on debt. It provides consumers with free access to their credit score, analysis, advice and tools to take control of their finances, unlock their credit potential and borrow smarter.