By Greg Fisher
In the past week, the mainstream media have repeatedly reported that a quarter of consumers now have credit scores under 600.
The stories stem from an Associated Press item that appeared as early as July 11 with the headline "More Americans' Credit Scores Sink to New Lows."
The AP story's premise contains some inconsistencies. These points explain them.
- The AP states that credit score company FICO indicated that 25.5% of consumers have a credit score of 599 or below.
- A news release by credit score company FICO dated July 13 contains a figure similar to that in the AP piece: Based on a certain score model, and on data from only one consumer reporting agency, 25.5% of consumers with scores have scores under 600.
- The AP report refers to information at myFICO.com that indicates that the percentage of those under 599 is, "[H]istorically, just 15 percent."
- A chart on a myFICO.com page titled, "About credit scores" illustrates a segment under 600 at 15%.
- The figures in the news release are based on "FICO 8 (BEACON 09)."
- FICO does not provide FICO 8 at its consumer website, stating, "When a significant number of lenders have upgraded, we will work with the credit reporting agencies to provide FICO 8 scores to consumers here on myFICO."
- Moderators at FICO's FICO Forums message board state that the model at myFICO is BEACON 5.0 (not BEACON 09).
- The news release is based on Equifax data, only.
- The data for the distribution that illustrates the 15% figure remains on a page on FICO's website and is named the "National Distribution of FICO Scores." Nothing on the page indicates that it is Equifax data, only.
- Even though AP reports a change to 25.5 percent in the sub-600 category, the distribution chart with the 15 percent number in the same category remains at myFICO.com.
- FICO.com refers to "BEACON 5.0 score as "widely used in the mortgage industry."
- Fannie Mae's lending standards still require the Equifax BEACON 5.0 score, not BEACON 09.
- In AP's premise, the 25% level was reached not this year, but over a year ago; the news release's 2009 sub-600 category is 25.2%.
Just for fun: In FICO's press release, the 2009 column in its chart adds up to 100.2%, not 100%, as it states.
Putting two and two together, it doesn't add up.
See Part II