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Are credit scores rising?

More people are making their loan payments on time, which should have a positive effect.

By MSN Money Partner Apr 23, 2012 11:47AM

This post comes from Gerri Detweiler at partner site on MSN MoneyA recent FICO survey finds that lenders are predicting fewer delinquencies on mortgages, small-business loans, auto loans and credit cards. If those predictions prove to be accurate, then consumers' credit scores may also continue to improve.


Image: Arrow Up Green (© Image Source/SuperStock) The survey, conducted for FICO by the Professional Risk Managers' International Association, found fewer lenders expecting a rise in delinquencies on home loans, car loans and small-business loans than at any time since FICO launched its survey in early 2010.


Payment history makes up about a third of credit score calculation. So if fewer consumers are paying late, it stands to reason that their credit scores could benefit as well. "What we should expect to see is a small upward movement in the credit score distribution," says Andrew Jennings, the chief analytics officer at FICO. "If delinquencies fall, therefore people are making more payments on time that should translate into better health of the credit population."

Post continues below.

In the earlier days of the recession, FICO reported that "lenders saw a sizable increase in the number of consumers who scored in the lowest (300-499) and the highest (800-850) segments of the FICO score range." But FICO reported a reversal in that trend after 2008, noting that "consumer scores have moved away from the tails of the distribution curve, and 2.8 million more consumers have scored in the 550-649 range." (Estimate your credit score for free.)


Are FICO scores on the rise?

Of course, it takes more than a drop in delinquencies for credit scores to improve. Negative information can remain on consumers' credit reports for seven years in most cases. As it gets older, this information often has less of an impact on credit scores, but it does factor into credit score calculations. Still, even those consumers who have been through very difficult financial problems can begin the process of rebuilding their credit once their situation is stabilized. And paying bills on time is the first step.

It takes credit to get credit

A current on-time payment history is essential to building strong credit. For those borrowers who are ready to get back in the game, the good news is that lenders are making credit more available. "The sentiment that comes out of the survey is that in particular in credit card and auto lending . . . supply will be there," observes Jennings.


The key, of course, will be for consumers to borrow cautiously so new loans don't create future late payments.


More on and MSN Money

Apr 29, 2012 4:07AM
Just an excuse to make people pay more money for loans. The rich pay less as the poor pay more. There are more poor people so this will never change.
Apr 29, 2012 11:01AM
THis is the BIGGEST scam in America....I have no debt only ever been late on 1 thing, simply cause i forgot, in 18 years and I cant get a score over 780 due to i dont have enough of a credit history, yet they deduct points for having to much credit or seeking credit... It is bull crap that your rates are based on a system which is so flawed.  @ Thomas  the rich and poor thing is bull crap..Your loans are based on your credit score not how much money you have...STOP  spreading the class warfare crap..
Apr 29, 2012 8:57AM
In just a few years, credit won't mean a thing. The only thing that will make any real difference is character.
Apr 29, 2012 10:54AM
Credit scores are a waste of time. There poor accuracy leaves a lot to be desired. Inaccuracy abounds.  Depending on them for credit worthiness or risk is a sad joke and little more than a scam prone to abuse and misuse.  Simply put, they are B.S.
Apr 29, 2012 11:19AM

Dumb story. It mentions, "In the earlier days of the recession, FICO reported that "lenders saw a sizable increase in the number of consumers who scored in the lowest (300-499) and the highest (800-850) segments of the FICO score range." But FICO reported a reversal in that trend after 2008, noting that "consumer scores have moved away from the tails of the distribution curve, and 2.8 million more consumers have scored in the 550-649 range."


But what it doesn't mention is that for many consumers, this was out of their control since financing dired up and financial instiutions cut borrowing limits, which increased individual credit to debt ratios which is also a factor in determining credit scores. In some cases baks raised interest rates in an effort to recover losses and "motivate" borrowers to pay debt. This created additional burdens on borrowers. One thing leads to another (no credit ceiling, no additional sources of financing, high interest on current debt); poor credit scores, spend what you make to pay down now high interest debts. Consumers go broke paying down debt or default. Then the financial gurus and economist wonder why there's an economic slow down and so much ire for the financial institutions??

Apr 29, 2012 2:31PM
Credit scores don't mean anything anymore. Be late on 1 payment EVER and watch your score plummet. Banks won't give out loans to those who have GOOD credit so why should it matter? You have to love our gov. they bail out the banks who then in turn refuse to refinance people who are in financial difficulty so they won't foreclose on their home, raise rates on credit cards, doubling payments, charging ungodly fees that accrue if you ARE late, it's just another way to force the middle class into poverty, and then give huge tax breaks to the small % of millionaires in the country...yeah...we're NOT BLIND, we SEE what is going on...and I say "screw the creditors, the banks, the credit card companies..." they won't help anyone, unless THEY have a chance of making a fortune off you.
Apr 29, 2012 2:45PM

The real truth in the article is "It takes credit to get credit" (because that's how they set it up). Because they have so easily thrown people under the "Transunion" bus in the past, it has now back fired on them. People have learned how to use credit as little a possible if at all.  They have learned how to live within their means, so that the "credit" industry is now hurting for business. If they are raising the scores, it's only to trap people all over again. Just like they inflated home values, then gave people loans against the inflated false value which landed the owners in debt and owing more than the value of their house (Old con-artist trick). If you are smart, you won't get back on that treadmill. Never take out a loan against what you already own. Save like crazy and do things a little at a time.

Apr 24, 2012 9:40AM
I'm seeing a lot of the same at our company. We've been fortunate that many of our customers are open to improving their credit and based on their testimonials, it's worked out quite well for them.
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