5 Interesting Bad Credit Statistics

Friday, November 13, 2020, 6:00 PM | Leave Comment

Your credit history (and credit score) has a massive bearing on your financial capabilities.

It determines most of the factors that go into deciding whether you qualify for financing and loans.

However, it’s surprising to know that many people do not stay informed of these elements.

To be credit-educated, there are specific trends you need to be aware of.

Today, we share with you some of the most relevant and insightful figures on what the credit situation looks like in the country.

1. About 11% of all US consumers come under the Lowest FICO Scores.
2. 18% of consumers come under the Sub-Prime Scores.
3. A majority of US Consumers (43%) enjoy higher FICO Scores.
4. Every one out of five consumers has inaccuracies on their reports.
5. A Quarter of Consumers with lower Incomes don’t know how to Improve their Credit.

  1. About 11% of all US consumers come under the Lowest FICO Scores

    It’s heartening to know that extremely-low FICO scores are a small minority today. FICO (the company that manages the FICO scores) revealed that the lowest scores constitute 11.1% (to be precise) of the consumer population. This category includes credit scores that rank lower than 550.

    The bad news here is that lower credit scores usually have to settle for unfavorable terms when securing installment loans for bad credit. It can mean fewer options or higher interest rates. However, the bright side is that almost 89% of the consumers are in medium to high scoring categories.

  2. 18% of consumers come under the Sub-Prime Scores

    Experian, a credit bureau, considers FICO scores of 580 – 669 as a sub-prime credit score. And according to FICO, 18% of consumers come under this category. In this category, consumers do not have as much risk as the lowest category (below 580). So, they won’t be subject to as much scrutiny or restrictions as the extremely-low category.

    But sub-prime scores can still rack up some difficulties for borrowers. Specific high-end financing options, such as premium credit cards, maybe beyond this category’s credit capabilities. So, the incentive is still there for these consumers to improve their score.

  3. A majority of US Consumers (43%) enjoy higher FICO Scores

    So, here’s some good news – FICO scores are rising for most American consumers. The 43% mentioned here covers all those consumers who enjoy credit scores from 750 – 800. And 22% of the consumers fall in the exceptional category with scores above 800. These figures reflect the improving credit capabilities of a majority of US consumers. It may also imply that consumers are more vigilant of credit regulations and are making wiser financial decisions.

    So, how do you make it to this elite group of FICO scores? Well, there are some essential financial qualifications you have to maintain.

    • Clear your bills and debts on time. There are no exceptions here. It has to be regular and consistent.
    • Maintain a low credit utilization rate. It’s essentially the ratio between the balance and the credit limit.
    • Enjoy a diversity of credit on your credit history – installment loans, line of credit, etc.
    • Avoid taking new loans frequently, and minimize hard inquiries.

  4. Every one out of five consumers has inaccuracies on their reports

    This one’s an interesting figure released by the Federal Trade Commission. It can include clerical errors or entry mistakes that can happen in any industry. However, with the credit bureaus, it means that your credit score can suffer because of these mistakes.

    Now, you can’t help bad credit scores due to poor financial choices. The only way you can change the score is by practicing wiser financial actions over time. However, if it is the institution’s fault, your credit gets affected for no fault of yours. In this case, it’s advisable to follow proper dispute processes. Once rectified, you may get a small boost in your credit history. These corrections do not cost you anything, and you should pursue them whenever detected.

  5. A Quarter of Consumers with lower Incomes don’t know how to Improve their Credit

    This figure makes a strong case to include credit education in our schooling system. Almost 25% of consumers from the lower-income category have little to no knowledge of credit scores. To improve your score, you need a basic understanding of how your credit history works. And since these topics aren’t taught in school, low-income consumers often miss out on the information.

    The 10th Annual Credit Survey revealed that:

    • More than 50% are ignorant of the fact that consumers can have more than a single score.
    • Up to 25% of consumers don’t know that credit scores matter for mortgage lenders too.
    • More than 30% don’t know that you can boost credit scores by maintaining lower card balances.
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