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More consumers nearing perfect FICO® Scores, but are scores improving?

My colleagues in FICO Labs monitor FICO® Scores and how they move over time. In our most recent review, we continue to see the effects of consumers’ scores moving up AND down.

At the high end of the score distribution, the number of consumers in the 800-850 range is at its highest level since October 2008. Some 18.3 percent of consumers have FICO® Scores in this range.

Contrast that with the 15.5 percent of consumers between 700-749, which is the lowest percentage we’ve seen since we began tracking this information in 2005. And the percentage of consumers between 750-799 (19.4 percent) is the lowest we’ve seen since April 2009.

We also found that 31.9 percent were in the 550-699 range. That is the most people with scores in that range since 2006.

It’s clear that there’s been a shift at both ends of the score distribution. Many consumers have moved into the top tier of the FICO® Score range by redoubling their efforts to maintain an excellent credit profile. Others have fallen into lower tiers, most likely due to the financial stress felt by many households.

Interestingly, the increase in the number of consumers in lower tiers doesn’t hold true at the very bottom of the FICO® Score range. The percentage of consumers with scores from 300-549 is 14.9 percent, the lowest percentage since 2006.

One possible explanation for this decrease is that lenders have written off a lot of bad debt and closed the riskiest credit accounts. So, at least 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.

The 2011 data in the graphic above reflects a more recent credit bureau feed than in my last score distribution blog post. As I noted last time, overall score distribution between 2005 and 2011 was fairly stable. But we’ll continue to keep our eye on even the slight changes, since these can have significant impact on portfolio profitability.

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