Credit scores shift during recession

A new study has been released by FICO which details some of the credit trends among consumers at the start of the recession compared to today.

In late 2008, which many economists point to as the start of the recession, lenders saw a considerable increase in the number of people with either bad credit or good credit, FICO reports. Low scores typically range between 300 and 620, subprime scores between 620 and 720, and high scores between 720 and 850.

FICO indicates that these trends are common. Low scores may result from quick credit problems among consumers who are highly leveraged, leading to serious delinquencies. Meanwhile, when the economy takes a turn for the worse, consumers who are in good financial standing tend to take additional steps to protect their finances by paying down debt and putting off new purchases that require financing. This pushes scores higher.

Since 2008, however, FICO says more consumers are scoring in the 550 to 649 range, perhaps due to serious delinquencies that appear on credit reports. Scores adversely affected by foreclosures can take several years to recover.

How long it takes a score to recover after creditors make errant notations may depend on how quickly it's addressed.