Credit Scores Steady in the Midst of Economic Crisis
Sign up for our FREE Monthly Email Newsletter
In addition to keeping in the financial know, you may be interested in checking your credit score and report.
¹The credit scores provided under the offers described here use the Equifax Credit Score, which is a proprietary credit model developed by Equifax. The Equifax Credit Score and 3-Bureau scores are each based on the Equifax Credit Score model, but calculated using the information in your Equifax, Experian and TransUnion credit files. The Equifax Credit Score is intended for your own educational use. It is also commercially available to third parties along with numerous other credit scores and models in the marketplace. Please keep in mind third parties are likely to use a different score when evaluating your creditworthiness. Also, third parties will take into consideration items other than your credit score or information found in your credit file, such as your income.
²The Automatic Fraud Alert feature is made available to consumers by Equifax Information Services LLC and fulfilled on its behalf by Equifax Consumer Services LLC.
³Equifax Credit Report Control™ is only available while you have a current subscription to Equifax Complete Premier. Locking your credit file with Equifax Credit Report Control will prevent access to your Equifax credit file by certain third parties, such as credit grantors or other companies and agencies. Credit Report Control will not prevent access to your credit file at any other credit reporting agency, and will not prevent access to your Equifax credit file by companies like Equifax Personal Solutions which provide you with access to your credit report or credit score or monitor your credit file; Federal, state and local government agencies; companies reviewing your application for employment; companies that have a current account or relationship with you, and collection agencies acting on behalf of those whom you owe; for fraud detection and prevention purposes; and companies that wish to make pre-approved offers of credit or insurance to you. To opt out of such pre-approved offers, visit www.optoutprescreen.com/.
4We will require you to provide your payment information when you sign up and we will immediately charge your card $4.95. After that, we will charge the card $19.95 for each month you continue your subscription. You may cancel at any time; however, we do not provide partial month refunds.
Equifax® is a registered trademark and Equifax Complete™ Premier is a trademark of Equifax, Inc. © 2014, Equifax Inc., Atlanta, Georgia. All rights reserved.
What did the financial crisis, the burst of the real estate bubble, and soaring unemployment do to American credit scores?
As it turns out, not much. While individual credit scores may have seen significant changes, the median credit score has not significantly shifted.
The median Equifax credit score in 2012 hovers around 697, largely in line with the median credit score in late 2007. Over the past five years, the median score has shifted up by only six points in a range from 280 to 850. That’s not even a 1 percent change, despite the economic turmoil that hit Americans through the recession.
How did credit scores remain so steady?
Credit stores have remained steady as a matter of balance. The highest-risk population—people carrying credit scores ranging from the bottom to 579—did increase over the course of the recession. This is the portion of the population that could not or did not make payments because of unemployment or debt stress like foreclosures.
The highest-risk population grew from 17.5 percent of the total number of borrowers to a 19 percent high in 2010. But these numbers have dropped since 2010 to 16 percent, representing an overall drop in the high-risk population over the past five years.
Meanwhile, the number of lower-risk consumers—those with credit scores ranging from 740 to 850—remained relatively steady, increasing by between 0.5 percent and 1 percent over the last five years. But lower-risk consumers make up a bigger piece of the pie—about 43 percent of the total number of people Equifax serves.
This larger population outweighed the lower-risk population, thus causing the six-point score increase to the median credit score.
Overall consumer confidence in the economy has been shaky at best over the past five years. The idea, then, is that many people have been spending less, paying off debt regularly, and taking out less credit. Lenders are also issuing less credit, and potential borrowers have to meet tougher lending standards.
The numbers support this idea. Credit originations have contracted—both consumers and lenders have taken out less credit in the past five years, and overall debt has decreased by nearly 12 percent, or $1.5 trillion, since October 2008.
There is one sector of the economy where lending has actually increased: the auto industry. Auto loans have increased 5.4 percent since 2010.
The data released this summer indicates some hopeful signs—higher median credit scores and a recent decrease in high-risk credit scores—but there’s still a long way to go before we fully recover.
Equifax maintains this interactive forum for education and information purposes in order to allow individuals to share their relevant knowledge and opinions with other members and visitors. We encourage you to participate in discussions about personal finance issues and other topics of interest to this community, but please read our commenting guidelines first. Equifax reserves the right to monitor postings to the forum and comments will be published at our discretion. Do you have questions or comments about your Equifax credit report or customer-service issues regarding an Equifax product? If so, please contact Equifax directly. All opinions and information expressed or shared in blog comments are solely those of the person submitting the comments, and don't necessarily represent the views of Equifax or its management.