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Credit scores, bureaus & technology. Bankruptcty activity. Credit-related lawsuits, announcements and coverage of F a i r Isaac, E q u i f a x, E x p e r i a n, F I C O, V a n t a g e Score & T r a n s Union.


Credit Scores Change With Economy

FICO score distribution adjusts since 2008

Sept. 19, 2011

By MortgageDaily.com staff


When the economy headed south, the number of consumers with very high or very low credit scores was increasing. Since the financial crisis peaked, however, the trend has reversed.

A sizeable decrease has been observed since 2008 in the number of consumers with credit scores between 300 and 499, FICO reported Monday.

The credit-scoring technology firm said that its findings were derived from a sample of consumer credit data from Equifax Inc.

Similarly, a decrease was also noted for consumers with scores ranging from 800 to 850.

The activity reversed a trend that occurred between 2005 and 2008 when the number of consumers in these two categories increased.

"In our experience, movement toward both tails of the distribution curve is typical during economic downturns," Rachel Bell, a director of FICO Labs, said in the report.

Bell explained that mainstream consumers at the top end of the score range likely moved to protect their finances by paying down revolving debt, postponing new purchases that would require financing and other similar actions. All these moves helped to improve credit scores.

Consumers a
t the lower end of the score range, however, were highly leveraged and the first to experience quick credit problems when the economy tightened.

But consumers with scores in the range of 550 to 649 have increased by 2.8 million since 2008. Bell explained that the increase might reflect "the impact to credit risk caused by serious delinquencies appearing on consumer credit reports.

"That particular shift could persist for several years," Bell said in the announcement. "As we reported in March 2011, score recovery from negative events such as mortgage foreclosure typically takes from three to seven years for consumers who meet their credit obligations following those events."

As with the outer groups, the middle group reversed a trend that was observed from 2005 to 2008 -- when the group was shrinking.

In all, around 200 million U.S. consumers have a FICO score.

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