December 27,2008
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Everything You Wanted to Know About FICO Scores*, Pt.4 –
– How does America stack up?10) Closed Accounts: Actually, this is measured as the difference between the total credit card accounts and the open ones.
11) Derogatory Items: Although this is categorized within some of the earlier categories, they don't all fit neatly into any single one of them. Therefore, it deserves a little more explanation. Typically a credit report will list items in order of importance to risk evaluators. This is usually one of the first items you'll find in the report and will give a figure of the number of these items found in the report. These can be things like charging a credit card ‘over it's limit' (a very bad thing) or a medical bill you can't pay (not so Important to the credit card industry). This is where the question of severity comes in. The new government regs have mandated that ‘derogitories' not relating to the credit card industry may no longer be used in making credit card risk decisions (may not be enforced till 2010, however). Late payments are scaled here for severity also. The new government regs have pushed the first level ‘grace period' (late, but not too late) from 5 days to 30 days before a consumer is allowed to be thrown to the wolves (Default rates and penalties). This 30-day period may eventually shortened some and may not go into effect till 2010 either.
So, how does America rate? Fairly good, actually. FICO Scores range between 300 (worst) up to 850 (best). According to the FICO group, It turns out that that hardly anyone is in the two lowest ranges. Only 2% of us are below 500. Even the next up range is pretty small – 5% more are between 500 and 550 with another 8% between 550 and 600. 12% more are between 600 and 650 with 12% more from 650 to 700. These are all below what the credit card industry is looking as of recent. The ‘OK' range of 700 to 750 was showing 18%, while the good range of 750 to 800 held the most with 27% of the card holders. Even the very best range (800 or higher) was well-populated with 13%. The overall median average at a score of 723 and the bulk (mean) is closer to 740.