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FICO, originators of the most popular credit scoring system, are reporting that one in four Americans now have a credit score of less than 600 out of a possible 850.
A score of less than 600 often puts the best interest rates and terms out of reach, and makes some types of loans impossible to get, especially under the tighter standards now in use by the nation’s largest lenders.
A low credit score can also lead to higher rates on car insurance, and even affect your ability to get a job.
FICO says that 25.5% of consumers — nearly 43.4 million people — now have a credit score of less than 600. In addition to restricting the borrowing of those directly affected, the inability of mass numbers of people to borrow could also slow the nascent economic recovery.
Historically only 15% of Americans have fallen into this category.
But there’s also good news. The number of consumers who have a top score of 800+ is going up. Nearly 18% of Americans are in this category, compared to the historical average of 13%.
To learn more about how credit scores are computed, visit this page of FICO’s website.
We’ve done several recent stories pertaining to credit scores.
- This story reveals the impact of specific credit-related issues, like bankruptcy or foreclosure, on credit scores.
- This story offers three ways to improve any credit score.
- This story explains how a bad credit score can lead to higher insurance costs.