You can tell the story of America’s economic woes with FICO scores.
First, a quick primer on FICOs. The Fair Isaac Corporation was one of the first to offer the familiar credit scores that lenders use to figure out the risk of lending to businesses and consumers. That score, which runs on a 300 to 850 scale, can affect everything from traditional loans to working capital loans to mortgages.
FICO scores can also be used on a wider scale to help tell an economic history. In this case, it’s sort of a Tale of Two Credits, one from 2005-2008 and the other from 2008-2011. Allow us to be your guide through the numbers, which come to us today courtesy of the FICO Banking Analytics Blog.
The Good Years: 2005-2008
During the times when the recession was more of an inkling in the minds of some economists than a fact of life, the distribution of credit scores was just starting to dip. The rise in those with the lowest possible scores rose half a percent from 2006 to 2007, but so did the percentage of those with the highest possible score of 800-850. All other credit score measures were roughly the same, with minor dips and rises.
At this point, the wobbly housing market was just starting to tip. Your average worker had little idea of what was coming down the pike, and thus habits didn’t change much. The surest sign that something was coming was the higher end of the spectrum going up and the lower end of the spectrum going up with it.
The New Credit Landscape: 2008-2011
Fast forward to the present day, and the recession has done its damage. The country is slowly making its out way out of the mire. Everyone is hoping we’ve seen the worst of what the economic downturn had to offer.
So where are the credit scores? Over the last three years, the numbers have fluctuated quite a bit. Strangely, the lowest 300-499 score has dropped to its lowest level in years, at 6.3 percent. At 18.1 percent, the highest scores are at their fourth highest total since 2005.
Yet the middle has suffered. Those with scores anywhere from 500-699 have all risen over the past year, a sobering reminder that the middle class, small-to-medium-sized businesses and those in between have been suffering thanks to a slow economic recovery.
This data isn’t very predictive, of course. But it does indicate the way the recession has lingered for many of us far longer than we might have hoped.
Has your credit score gone up or down since the recession began?
Follow Us On Twitter | Join BizEngine On Facebook | Subscribe To BizEngine By E-mail
Photo credit to http://www.istockphoto.com/stock-photo-11527723-target.php?st=5a5c230
Subscribe via RSS
Follow on Twitter
Connect on LinkedIn
Connect on Facebook
Loading ...