Bad Credit Scores and High Credit Scores Both Surged in Spring 2010

More than a quarter of Americans now have credit scores below 600, according to officials at FICO Inc. The company that developed some of the scoring models most favored by credit card issuers reviewed April 2010 credit reports to arrive at the estimate. According to an Associated Press report, only 15% of U.S. residents typically fall under the 600 level considered unfavorable by most lenders. Analysts polled by the AP attributed drops in FICO scores to recent economic factors, including:

  • An overall reduction in consumer credit, including lower credit card limits,
  • Increased home loan default and foreclosure activity, and
  • Higher unemployment, causing more Americans to miss credit card payments.

Meanwhile, the distribution of FICO scores into a bell curve continued last spring as more Americans than ever qualified for credit scores above 800. Analysts suggest this surge in higher scores follows a wave of consumers making consistent credit card payments far higher than the required minimums. Since on-time payments and credit utilization comprise a large portion of FICO's algorithm, credit scores tend to reward borrowers who actively use about half of their available credit card limits.