Tag Archives: Consumer Issues

Risk & Compliance NBC News Probes Two Changes That Could Boost Credit Scores

NBC News Credit Scores Video - retro reporter image
Mar202017

NBC Nightly News recently aired coverage where they examined two changes that could boost credit scores for millions of US consumers. The news agency examined last year’s announcement of FICO® Score XD, aimed at the millions of US consumers who otherwise cannot receive a FICO® Score due to insufficient or stale data in traditional credit bureau files. NBC News discussed how the new score leverages alternative data, such as utilities payments and wireless and cable bill payment history, to determine credit scores. And starting July 1, the three major credit reporting agencies are dropping certain negative information from credit reports, including tax liens and civil judgments. NBC Nightly News shares FICO estimates that 12 million consumers will see their FICO® Scores increase – although, roughly 11 million of these consumers will see only a slight score increase of less than 20 points. View the NBC Nightly News video: Changes to Credit... [Read More]

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Risk & Compliance Auto Loan Credit Quality: Hazardous Road Conditions Ahead? Part 2

Auto Lending Credit Trends #2
Feb282017

In my last blog post, I shared a new FICO research study on credit trends in auto lending. One key finding highlighted that the size of auto loans has been increasing faster than inflation since the recession. So how are consumers affording these larger loans? It’s simple: consumers are ending up with longer terms for their car loans: While five-year loans were the most popular length of terms in 2009, there has been a swing towards opening six-year loans since then. Seven-year loan terms—while still rare at ~5% of all new loans—seem to be increasing in popularity as well. This trend towards more six-year loans occurred across all FICO® Scores. This shift may signal an increase in credit risk for the industry because six-year loans have historically had higher delinquency rates. However, confirming this requires some care in our analysis. The lingering effects of the recession, average age of the... [Read More]

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Risk & Compliance Auto Loan Credit Quality: Hazardous Road Conditions Ahead?

Auto Lending Credit Trends
Feb222017

The gist of recent media coverage on the state of US auto lending can be summarized by the title of a recent New York Times article: As Auto Lending Rises, So Do Delinquencies. With this concern in mind, FICO recently conducted a research study to examine the credit quality of US consumers with auto loans, as well as other significant credit trends in auto lending. Our findings tell an interesting tale: Banks have been mildly decreasing their car loan underwriting standards. Overall indebtedness for many consumers has been declining since the Great Recession. The size of car loans has been increasing faster than inflation since the recession. More consumers now have six-year auto loans instead of five-year loans, which were the previous standard. These six-year loans have higher delinquency rates, thus this shift to longer-term loans is likely to result in higher losses for US auto loans over the next... [Read More]

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Risk & Compliance For Consumers Seeking Credit Scores, VantageScores Are No Substitute for FICO® Scores

Consumers + credit scores
Feb132017

Consumers today are being bombarded by offers to get their “credit scores” for free.  These lead generation websites don’t provide the FICO® Scores used by nearly all lenders – but some “experts” say that doesn’t matter.  In fact, some people claim that the VantageScores distributed to consumers through these websites are perfectly good approximations of the FICO® Scores used by lenders. The argument goes something like this: because multiple versions of the FICO® Score exist and are used by thousands of lenders, no single FICO® Score represents a consumer’s “credit score”.  It doesn’t matter whether a consumer receives a FICO® Score or VantageScore because they all work similarly: if you rank high on one score, you’ll rank high on another score, and all these scores move up and down together. This is simply not true, and new research confirms it. FICO has nine widely used versions of the FICO® Score... [Read More]

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Risk & Compliance Will FICO® Scores Determine the Super Bowl?

FICO Scores Super Bowl
Jan252017

Super Bowl fever is starting to build as Super Bowl Sunday approaches. As part of the lead-up to the game, there is a great deal of speculation and analysis (and non-stop media coverage!) on which team will take the title — the Atlanta Falcons or the New England Patriots. Of course, people are studying stats with obvious relevance to a victory: team performance during the season, comparison of team member “big game” experience and physical strengths/weaknesses, injuries, projected game-day weather conditions, etc. Other much less intuitive data points include the conference in which the team resides, distance travel to Super Bowl host city location, the intensity of the fan base, team colors, local food specialties, even team mascot. But what about FICO® Scores? Could they offer clues to the final score that determines next Sunday’s winner? For fun, we analyzed and compared several credit attributes for populations in the greater... [Read More]

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Risk & Compliance Medical Collections Rates Highest for Consumers Aged 24-46

Medical-Collections-by-Age
Jan112017

Since medical costs often increase as we age, one might expect that the rate at which medical bills are unpaid and then sent to collections companies would also increase with age – at least until age 65 when US citizens qualify for Medicare. New FICO research shows that not this not the case. Looking at credit bureau data as of July 2016, medical collections reporting – both paid and unpaid collections greater than $99 – breaks down by age as follows: While the peak of this curve occurs at age 27, the rate of consumers with medical collections is uniformly high for ages 24 to 46. Over a quarter of consumers in that age range have at least one such collection showing on their bureau report. After age 46, we see the rate slowly drop, and as expected, it drops substantially after age 65. Part of the issue stems from... [Read More]

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Risk & Compliance 2017 Banking Regulatory Predictions—Brace for a Sea Change

2017-Banking-Regulatory-Predictions
Jan092017

Last fall, I suspect that most regulatory compliance professionals in the U.S. consumer lending market anticipated 2017 would be more of the same. This meant a continued focus on implementation of recently adopted rules, while bracing for a wave of new regulations from the federal banking agencies. Everything changed on November 8. The unexpected election of Donald Trump resulted, in many cases, in a 180-degree course correction. The Trump administration, bolstered by the reelection of a Republican majority in both houses of Congress, has fostered a new environment that is expected to promote de-regulation. While I won’t ever be mistaken for Nostradamus, amidst this regulatory sea change, I feel (relatively) confident in sharing with you my top regulatory compliance predictions for 2017. A little-known law will have big impact on regulation. Haven’t heard of the Congressional Review Act (CRA)? You are not alone. This obscure statutory provision was adopted in... [Read More]

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Risk & Compliance FICO® Score High Achievers: Is Age the Only Factor?

fico-score-high-achiever-featured-image-blog
Nov032016

FICO’s latest research on national FICO® Score distribution shows that US credit quality continues to trend upwards, with an increasing number of consumers scoring in the highest scores ranges. Given that, we decided it was time to refresh our study on “FICO® Score high achievers,” where we examine the credit behavioural profiles of consumers with higher credit scores. As expected, our latest study showed that older people generally have higher scores, as has been the case in our past research. This is largely because they have trade lines that have been open longer, which leads to higher scores (assuming the trade lines are in good standing and all other things equal). The most credit savvy among you will remember that length of credit history accounts for roughly 15% of the overall FICO® Score calculation. But for younger consumers, it isn’t too helpful to say, “just wait until you are 50... [Read More]

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Risk & Compliance Research Shows Mortgage Delinquencies Rise for Older Consumers

Sep272016

FICO research consistently shows that older consumers have higher FICO® Scores than their younger counterparts. But a recent report by the Mortgage Bankers Association (MBA) provides evidence that people become less reliable at making their mortgage payments as they age. Can both of these assertions be right? To get to the bottom of this, FICO conducted fresh research on credit behavior trends by age. Our study revealed not only that mortgage delinquency rates rise for US consumers beyond a certain age, but that these delinquency increases were observable across other loan types. Is this cause for concern? And was the MBA correct in their conclusion that declining memory and other cognitive skills are the main contributing factor? In this post, I’ll share our research findings and draw a few conclusions based on what we see in the data. Delinquency Trends by Age For this research, we examined payment behavior using... [Read More]

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Customer Engagement FICO Survey: Are Millennials Embracing Mobile Payments?

Millennials-Mobile-Payments-featured-image
Sep222016

Millennials love their smartphones—so much so that in recent research, millennials ranked them as more important than a toothbrush or even deodorant. It is a good thing 90% of millennials have smartphones! Of course, many of our clients want to know more about millennial banking habits. FICO’s latest US consumer research survey found that large numbers of millennials are using their bank’s mobile application regularly. Some 66% use the app several times a week, and 30% use it daily. This is great news for banks because it provides them an amazing opportunity to play a central role in the lives of their customers. I’ll spend some time in a future post talking about using those phones for different types of financial-related communications, but today I wanted to focus on mobile payments. If millennials love and have phones, and trust them to conduct banking transactions, how do they feel about using them... [Read More]

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