The number of consumers in the top credit score range has reached its highest level since fall 2008, a report by FICO Labs shows, which could indicate more Americans are working to better their personal finances, including improving their credit reports. (If you want to know more about how a credit score works, check out: What’s a Credit Score?)
More than 18 percent of consumers now have FICO scores between 800 and 850—the first time the ratio of consumers has grown to this figure since October 2008, FICO Labs reports.
However, the number of consumers with scores between 700 and 799 hasn’t improved in the same manner. The report states 15.5 percent of U.S. residents have scores in this range, which is the lowest the figure has been since FICO Labs began recording the statistic in 2005.
Additionally, the report found that nearly one-third of the country’s consumers have FICO scores between 550 and 699—the most amount of people with a score in this range since 2006.
According to FICO, this data likely denotes there are still a considerable amount of Americans in poor or average financial standing.
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Despite many Americans in evident need of a credit tune-up, Rachel Bell of FICO Labs stated the report indicates a considerable change in consumers’ attitudes toward their personal finances.
“Many consumers have moved into the top tier of the FICO Score range by redoubling their efforts to maintain an excellent credit profile,” said Bell. “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.”
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One facet of the report that stands out, according to Bell, is the percentage of consumers with FICO scores in the 300-549 range—nearly 15 percent. This is the lowest the figure has been since 2006. The reason for the reduced figure, Bell notes, is due to many lenders writing off a substantial amount of bad debt.
“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,” Bell added.
by: Michael Creditfirm.
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by: Michael Creditfirm.
A credit score is a number which is based on a statistical analysis of a person’s credit file, to represent the creditworthiness of that person. A credit score is primarily based on credit report information typically sourced from the credit bureaus. A credit score is primarily based on credit report information, typically from one of the three major credit bureaus: Experian, TransUnion, and Equifax.
Different Types of Credit Scores
*FICO Fair Isaac Co.
*FICO has more than one formula for determining a credit score.
*The 3 most common FICO Algorithms are:
- FairIsaac 2.0 (used by Experian)
- Beacon 5.0 (used by Equifax)
- FICO RiskScoreClassic 04 (used by TransUnion).
Don’t let the different credit scores confuse you, they all follow the same basic algorithm in determining your creditworthiness.
By improving the factors which are used to calculate the credit score, Credit Firm helps increase your credit score.
Why do you need a good credit score
Lenders, such as banks and credit card companies, use credit scores to evaluate the potential risk posed by lending money to consumers and to mitigate losses due to bad debt.
Lenders use credit scores to determine who qualifies for a loan, at what interest rate, and what credit limits.
Credit scoring is not limited to banks. Other organizations, such as mobile phone companies, insurance companies, landlords, and government departments employ the same techniques.
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