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FICO® Scores and Early Retirees.


FICO® Scores and Early Retirees.

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This article was posted on September 1, 2002.

We did an interesting survey over on the Motley Fool in late July on the FICO credit bureau scores of early retirees. If you've applied for a home mortgage or done a refinancing in the past five years, you probably already know what a FICO score is. If not, here's a brief review.

Your FICO Score

A FICO is a credit bureau score calculated with software developed by Fair, Isaac & Company. All three of the major credit bureaus (Equifax, Experian and TransUnion) use this software. The FICO software takes into account a large number of parameters that statistical studies have shown will predict a customer's credit risk (i.e., the risk that the customer will not repay a loan.) FICO scores are reported on a scale of 450 to 850. The higher the number, the better the credit risk. About 1% of the population have scores above 800. The bottom 20% of the population score below 620.

To learn more about FICO scores see the following link at the Fair-Isaac web site.

Where do I find my FICO score?

Your credit report should contain your FICO score. If you live in the states of Colorado, Georgia, Maryland, Massachusetts, New Jersey, or Vermont, you can get a free copy of your complete credit report. If you live in any other state, a fee of up to $9.00 is imposed by the major credit bureaus to view a copy of your report.

Here are the links to the three major credit reporting services. (Don't forget that you will be charged for a report if you don't live in one of the six states mentioned above.)




The Retire Early Survey of FICO Scores

We did an informal poll of the early retirees who frequent the Retire Early Home Page message board on the Motley Fool. Respondents were asked to go to the E-Loan web site and obtain a free copy of their credit score and anonymously report the results. They are summarized below along with a comparison to the credit scores of the population at large obtained from the Fair-Isaac web site.

Fair, Isaac & Company
Consumer Credit Scores
Credit Score General
Early Retiree
above 800 Top 1% Top 45%
780-799 19% 19%
745-779 20% 22%
690-744 20% 11%
620-689 20% 4%
below 620 bottom 20% 0%

Clearly, early retirees must be among the most creditworthy individuals on the planet. However, I suspect few of them are in the market for a loan. Most early retirees get there by avoiding debt and maximizing their savings.

I guess it's true that banks prefer to lend money to people that don't need it.

Why should you even care about your credit score?

Even if you have no need to borrow money, your credit score can affect you. Many insurance companies use credit scores as one factor in determining auto and homeowner's insurance premiums. Here's an article on the subject.


It probably makes sense to check your credit score at least once a year. If your 800 credit score inexplicably drops to 550, it may be the sign of a problem like "identity theft" where an imposter uses your name and social security number to secure loans in your name.

(Note: FICO® is a registered trademark of Fair, Isaac & Company.)

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Copyright 2002 John P. Greaney, All rights reserved.

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