Explain FICO Drift
The Fair Isaac Corporation breaks up FICO credit scores, classifying consumers in various categories based on their credit scores. Fair Isaac has found that there is a tendency for FICO scores to all move down together sometimes due to factors that influence all consumers. This means the credit risk profile of all FICO score categories moves up indicating a higher possibility that more consumers in each credit category will default than before.
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High End of Scale
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In comparing credit scores for the years 2008, 2009 and 2010, Fair Isaac found that 19 percent of consumers had credit scores in the 800 to 850 range, which indicates an excellent credit profile, in April 2008. This figure had drifted down to less than 18 percent of consumers by April 2010.
Impact on Lower End Too
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At the low end of the FICO score distribution, FICO found that about eight percent of consumers had score distributions in the 500 to 549 range, which indicates a below-average credit profile, in April 2008. By April 2010, nine percent of consumers fell into this category.
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Influence of Economy
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The years for which FICO did the report--2008, 2009 and 2010--were a period of economic stress in the U.S. economy. The stressed environment impacted the credit performance of all consumers, causing their FICO scores to drift down together.
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