FICO Score Report – Consumer Credit Trends

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There appears to be some positive trends in consumer credit, as the percentage of U.S. citizens with FICO Scores between 800-850 reaches a post-recession high. According to a recent report conducted by FICO Labs researchers, the number of consumers in the top FICO® Score range – 800-850 – is now at its highest level since October 2008, with 18.3 percent of consumers having FICO® Scores in this range.

Rachel Bell of FICO Labs was quoted as saying the following in a FICO press release published in April:

Woman in red jacket at home

“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 700-850, which means Americans have managed their credit well despite the economic downturn.”

While this is good news, the report indicated that there is still has room for improvement when it comes to overall consumer credit health. The number of consumers with FICO® Scores between 700-799 (19.4%) has not yet rebounded and is the lowest FICO has seen since April 2009.

The percentage of consumers in the 700-749 bracket (15.5 percent) is the lowest that FICO has ever seen since the company began tracking this information in 2005.

Interestingly, the bottom tier of FICO® Scores – 300-499 –  presented the lowest percentage (14.9%) since 2006. According to Bell, this could be due in part to many lenders eliminating bad debt by closing risky credit accounts and writing off unpaid loans.

“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 550-699 range,” said Bell.

FICO® Scores are used by lending companies worldwide to help determine creditworthiness and evaluate financial risk. Higher FICO scores mean lower credit risk and will usually lead to better interest rates and loan terms. Low scores mean greater credit risk and will probably result denied credit or having to pay higher interest rates with less favorable loan terms. The highest possible FICO score is 850 and the lowest is 300. Most of the U.S. population scores between 500 and 799.

Anna Platz is an Editor at ForTheBestRate.com, a leading mortgage rate research website, as well as the Lead Contributor to GoodCentsSavings.com, a blog about budgeting and personal finance. Anna is immersed in the world of real estate, mortgage, and home financing and is here to provide valuable resources for homeowners and soon-to-be-homeowners on buying and selling real estate, researching a mortgage broker or lender, and securing a home loan. Check back often for news, updates, and remember that you can find today's current mortgage rates at ForTheBestRate.com. My Google Profile+

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