In a piece of hopeful economic news, an increasing number of people in the US have credit scores in the top range of 800-850. The Fair Isaac Corporation, or FICO, tracks consumer credit history and assigns credit scores based on information from the three major credit bureaus – Experian, Equifax, and TransUnion. Scores are within a range of 300-850, with anything below 600 considered subprime. A credit score over 800 will generally qualify consumers for the best credit cards, with low APRs and high rewards, as well as loans of all sorts.
The FICO survey, released on April 30, found that 18.3 percent of consumers have a credit score in the 800-850 range. While that may not seem like a very big number of Americans, it`s still the highest percentage we`ve seen since the economic crisis of October 2008, when that percentage was 18.7.
Not All Good News
The majority of people, 19.4 percent, fall into the 700-799 level. This number has not yet recovered to pre-2008 status, when 19.6 percent of people had a score in the 700s. Also troubling is the fact that the number of people with credit scores below 600- subprime levels – has grown from 9.6 in 2010 to 9.8 in 2011. Scores between 600 and 649 made the biggest jump, from 2010 when 9.5 percent of consumers fell into this category until now, when a full 10 percent of people are hovering just above the subprime classification.
FICO`s Take on the News
Rachel Bell of FICO says that “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.”
Still, she feels that the news is optimistic, overall. Although she acknowledges the shifting numbers are not entirely positive, Bell feels that “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.”
Strategies for Boosting Scores
What have consumers been doing to achieve those FICO scores between 800 and 850? The biggest thing people can do to maintain a good credit history, or raise a credit score, is simply to make payments on time. Late payments are the biggest factor in low credit scores, and just a few late payments can be enough to damage a decent credit rating.
Some other factors that play into a credit score are the debt to credit ratio – that is, how much of a consumer`s total credit line is available – and type of debt, whether revolving debt or installment debt. Credit card debt is revolving debt, because you can keep borrowing and making payments, theoretically never paying the debt off completely. A mortgage, which is a fixed amount with an installment payment plan in place, is an example of an installment debt.
Bottom of the Barrel
Regarding those with the very lowest FICO scores, those between 300 and 549, the 14.9 percent of people occupying that bracket represents the lowest percentage in the last five years. That may be because, according to Bell, “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.” However, those consumers may have begun to do better financially as well. “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,” concludes Bell.