Many households found that their financial fortunes changed during the pandemic, and these changes were often reflected in their credit scores. A recent CFPB analysis found that the distribution of credit scores shifted upward during the pandemic, suggesting that pandemic-era mortgage forbearances, the federal student loan repayment pauses, and federal cash transfers that improved some consumers’ financial wellbeing drove the overall increases in credit scores. 1 In this blog, we analyze increases in scores by looking at credit score tiers, labeling consumer credit scores as deep subprime, subprime, near-prime, prime, or superprime. These tiers are important to study because many lenders use them to make loan decisions and set the terms of credit. A higher credit score tier can allow a consumer access to more and cheaper credit, holding all else equal. We found that the deep subprime and subprime tiers experienced the biggest upward shift, though individuals in higher credit score tiers were also more likely to move up at least one tier than they were before the pandemic. Forty-three percent of consumers with subprime credit scores moved up at least one tier during the pandemic, whereas in the ten years prior to the pandemic, only 37 percent moved up at least one tier.
We used data available to the CFPB to examine the transitions of consumers across credit score tiers using a commercially available credit score. The data are quarterly snapshots from June 2010 through June 2022 of the Consumer Credit Panel (CCP). The CCP is a 1-in-48 deidentified longitudinal sample of credit records from one of the nationwide consumer reporting agencies. We assigned consumers to five credit score bins as in other CFPB work characterizing borrower risk profiles: Deep Subprime (300-579); Subprime (580-619); Near-prime (620-659); Prime (660-719); and Superprime (720-850). For each quarter of the CCP through June 2021, we assigned consumers a credit score bin reflecting their credit score, and a score bin reflecting their credit score 12 months in the future. The figures display these 12-month transitions between score bins. Each number represents the percent share of consumers who have transitioned to a particular credit score bin, aggregated across all quarters of the CCP separately by the pre-pandemic and pandemic periods.2 The pre-pandemic era includes consumers in quarters from June 2010 through December 2019 and the pandemic-era includes consumers in quarters from March 2020 through June 2021.