Tag Archives: Credit Trends

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 FICO Research: Are Millennials Really Abandoning Credit?

Feb082017

Nothing fascinates us more in the world of demographics than what the Millennial generation think, do and how they act.  One thing for sure is that, as they vie with the Baby Boomers to be the largest demographic group here in the USA, what they do is important. And we don’t need to be statisticians to know that the Baby Boomer generation isn’t going to be getting any bigger. The question for many in financial service boils down to this: Are Millennials really abandoning us? The topic came to mind for me recently as I was asked to be part of a panel discussion on credit and the economy at an ABS East conference. Since much of what gets said about Millennials seems to be more opinion than fact, I decided to look at a few stats and see if we could cast any light on what might be happening.... [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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Collections & Recovery FICO Survey: APAC Consumers Taking Longer To Pay Bills

Dec222016

It’s Christmas time again and apart from the jingling of bells it’s also a time for the juggling of bills. And apparently, that’s getting harder than ever in Asia Pacific. That was the firm message we got from our Asia Pacific collections managers when we polled them about what had been happening with their customer base over 2016. Three in five respondents from banks, telcos, and utilities revealed that their customers have taken longer time to pay their bills in the past year. The 60-days past-due segment has seen the highest growth according to 41 percent of respondents. 72 percent of collections managers also registered an increase in the number of first-time delinquents. This is in keeping with figures out earlier this year from Moody’s that reported household debt in Asia has grown at an average of 13.5 percent a year. Our survey, conducted last month at our FutureCollect event... [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 FICO Research: Student Loan Explosion Hurts Other Borrowing

Writing on chalkboard
Oct202016

The student loan crisis in the US is getting much worse — student loan debt is over $1.3 trillion and is increasing by more than $2,700 per second. Lenders cannot ignore the impact of that debt on individual borrowing. Our latest research shows that: The number of US consumers aged 25-34 with student loan debt of at least $50,000 doubled from 2005 to 2015. During that same time, the average student loan debt across all age 25-34 consumers also doubled — by comparison, average credit card debt and mortgage debt for this population actually fell. While the number of consumers age 25-34 with student loans grew from 2005 to 2015 (from 27% of this population to 40%), there are fewer 25-34 year olds with mortgages or credit cards than 10 years ago.   In fact, our data shows that people with active student loans are far less likely to have... [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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Risk & Compliance US Credit Quality Rising … The Beat Goes On

Sep132016

When I last blogged about the national distribution of FICO® Scores a year ago, US consumer credit quality was continuing to climb upwards, though with some potential indications of change ahead. At the end of that post, I asked: has the 7+ year upward trend started to level off? 12 months later, the answer is a resounding “no”! The number of consumers scoring in the super-prime range of 800 or above has continued to grow. In October 2015, this figure surpassed 20% of the national population for the first time since we’ve been tracking this metric, dating back to pre-recessionary 2005. In the subsequent six months, the figure continued to climb, reaching 20.4% as of April 2016. Inversely, we see fewer consumers scoring in the lowest score ranges. As of April 2016, just 20.7% of the population score 600 or below. This figure peaked shortly after the Great Recession, at... [Read More]

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