How much does missing a payment impact a FICO® Score? What about reducing credit card balances? New FICO research simulated how different credit events may impact FICO® Score 9 for five different credit profiles, as seen in Figure 1 below. These representative profiles were selected because they had credit characteristics (payment history, utilization, etc.) that were generally typical of the five scores shown below. Sophia has the only profile with delinquencies, and she also has the highest revolving utilization. Since payment history (35%) and amounts owed (30%) represent the 2 most important categories of the FICO® Score, she unsurprisingly has the lowest FICO® Score of the group. David has a thin file and is relatively new-to-credit, while Mike, Rachel, and Maria all have thick and mature files with varying debt and utilization levels. The key takeaway of the results of five different simulations (Figure 2) is: The impact to FICO® Score... [Read More]
For many people, owning a home is still a significant milestone in their financial and credit journey. We recently studied the impact of millennials’ student loan debt on their willingness and ability to obtain new mortgage loans. As the housing market continues to remain competitive, we looked at key trends in FICO® Score distributions and default rates for those who have proven they would like to and are able to obtain mortgage loans. The first clear trend observed around newly originated mortgages is that as we get further away from the Great Recession, underwriting criteria seems to have eased and a broader section of consumers are obtaining mortgages as a result. Figure 1 contains a FICO® Score distribution for mortgages opened in different periods between 2009 to 2017. We see that the percent of new mortgage account openings with FICO® Scores less than 750 has climbed significantly in recent years,... [Read More]
It’s no secret that the holidays mean more spending. But that can become a problem when spending leads to significantly higher credit card balances, missed payments, and a lower credit score. If this happens to you during the holidays, you aren’t alone. Average revolving debt – the type of debt incurred by using credit cards – was 4.5% higher in January 2017 than in October 2016. Young consumers (age 18-34) exhibited the largest percent increase (5.0%) of any age group, driven by the fact that their average revolving debt levels are the lowest of all age groups. Even more notable, 33% of Americans increased their total credit card debt by 10% or more between October 2016 and January 2017. Not only can increased credit card debt feel stressful, but credit card debt can have an impact on FICO® Scores. Credit card debt increases your credit utilization ratio, which impacts your... [Read More]
The National Consumer Assistance Plan (NCAP) is a comprehensive series of initiatives intended to evaluate the accuracy of credit reports, the process of dealing with credit information, and consumer transparency. In a previous post, we showed that July 2017 NCAP public record removals (civil judgments and some tax liens) had no material impact to FICO® Scores. In mid-September 2017, the three consumer reporting agencies (CRAs) are also scheduled to remove the following from credit reports: Medical collections less than 180 days old Medical collections that are ‘paid by insurance’ FICO recently conducted research on a representative sample of millions of US consumers to assess the impact of the NCAP-driven removal of these 3rd party medical collection agency accounts on the FICO® Score. Our results showed that NCAP-related medical collection removals have no material impact on the aggregate population to the FICO® Score’s predictive performance, odds-to-score relationship, or score distribution. The removal of medical collections... [Read More]
The National Consumer Assistance Plan (NCAP) is a comprehensive series of initiatives intended to evaluate the accuracy of credit reports, the process of dealing with credit information, and consumer transparency. As a result of NCAP, in July 2017, the three credit reporting agencies (CRAs) are scheduled to make required changes to the criteria used to accept the reporting of a tax lien and/or civil judgment. It is anticipated that civil judgments and some tax liens will be removed from consumer reporting agency (CRA) data when this goes into effect, including previously reported tax liens and/or civil judgments that do not meet the new NCAP-related reporting requirements. All credit scores that utilize CRA data will be impacted, including but not limited to FICO® Scores. FICO recently conducted research on the most widely used FICO® Score versions at all three CRAs to assess the impact of the NCAP-driven removal of public records... [Read More]
