Financial Resilience: FICO Data Shows New US Borrowers Are More Fragile

FICO recently released its latest FICO® Resilience Index benchmarking analysis, revealing further insights and trends about US borrower resilience over time and across different industries. As a reminder, FICO Resilience Index is designed to rank-order consumers with respect to their resilience to severe economic stress, enabling lenders to identify relative strengths and vulnerabilities in their credit portfolio resilience profiles. Spanning a series of five snapshots between 2007 and 2023, these analyses support credit portfolio management decisions across the credit lending lifecycle, ultimately leading to stronger, more resilient portfolios with more stable long-term profitability.  

Our 2023 FICO® Resilience Index 2 benchmarking report shows: 

• Improved existing borrower resilience year-on-year. The average FICO® Resilience Index 2 value of existing borrowers (existing accounts scored for account management) across all industries reduced significantly from 53.3 in 2022 to 51.8 in 2023, in line with the historically low average value seen in 2013. 

• Slightly higher new borrower sensitivity year-on-year. The average FICO® Resilience Index 2 value of new borrowers (scored for account originations) across all industries increased slightly from 56.7 in 2022 to 56.9 in 2023, continuing to approach the historically high average value seen in 2007. 

• Higher new borrower sensitivity vs. existing borrower sensitivity. Nearly 38% of new borrowers were defined as either Sensitive (FICO® Resilience Index 2 value between 60 and 69) or Very Sensitive (FICO® Resilience Index 2 value between 70 and 99) as of January 2023, compared to just 21% of existing borrowers as of April 2023. 

In addition to refreshing many of the analyses from last year’s post, “FICO® Resilience Index - Benchmarking Portfolio Resilience,” this updated analysis also includes new views of borrower resilience to support credit portfolio management. It presents an analysis of new and existing borrower resilience levels across different industries, including bankcard, auto finance, personal installment loans, and mortgages.  

Recent FICO® Resilience Index Trends 

As seen in Figure 1, borrower resilience was higher overall in 2023 compared to 2022 for existing borrowers, but slightly lower in 2023 vs. 2022 for new borrowers. While existing borrowers have consistently shown greater economic resilience than new borrowers over time, the 5.1-point difference in 2023 was the highest observed among the five snapshots. These trends suggest that lenders are introducing more latent credit risk from newly originated loan accounts, while still managing credit portfolio resilience levels overall. 

Figure 1: Borrower resilience was higher overall in 2023 compared to 2022 for existing borrowers, but slightly lower in 2023 vs. 2022 for new borrowers. 

Credit portfolio management during times of economic stress can be a balancing act, so it is helpful to track changes in exposure to segments with the highest borrower sensitivity. As seen in Figure 2, the percentage of existing borrowers in the Sensitive (60-69) or Very Sensitive (70-99) FICO® Resilience Index 2 segments fell even below levels seen during the benign economy of 2013, indicating improved borrower resilience. In contrast, the percentage of new borrowers that were Sensitive or Very Sensitive continued to increase towards levels last observed in 2007, just ahead of the Great Recession, indicating increased borrower sensitivity. 

Figure 2: The percentage of existing borrowers in the Sensitive (60-69) or Very Sensitive (70-99) FICO® Resilience Index 2 (FRI 2) segments fell even below levels seen during the benign economy of 2013, while the percentage of new borrowers in these sensitive segments continued to increase towards levels observed just before the Great Recession.  

FICO® Resilience Index Trends by FICO® Score Band 

Although FICO® Resilience Index is overall not highly correlated to the FICO® Score, borrowers with FICO Scores between 760 and 850 consistently have higher economic resilience than borrowers with lower FICO Scores. Interestingly, the borrowers most likely to be considered Sensitive or Very Sensitive had FICO Scores in the middle of the credit score range rather than at the lowest end. This is a key observation for credit portfolio resilience management strategy considerations, as it appears that more “borderline” credit decisions tend to be made in the middle of a credit score range than at either end.  

Across all FICO® Score bands (especially higher ones), existing borrowers were less likely than new borrowers to fall into segments indicating high borrower sensitivity, as shown in Figure 3. 

Figure 3: Across all FICO® Score bands (especially higher ones), existing borrowers were less likely than new borrowers to belong to Sensitive or Very Sensitive FICO® Resilience Index 2 segments.  

Cross-Industry FICO® Resilience Index Comparison 

As seen in Figure 4, existing borrower resilience varied significantly between different industries. To illustrate these differences, existing borrower resilience was classified by two well-correlated metrics introduced above in Figure 3: average FICO® Resilience Index 2 values and the percentage of borrowers in Sensitive or Very Sensitive FICO® Resilience Index 2 segments. Along both dimensions, existing borrower resilience was highest in the “All Industries” view, which includes all scorable borrowers with at least one existing reported tradeline of any type. Conversely, borrower sensitivity was highest in the Personal Installment Loan view.   

Portfolio managers can leverage these insights to refine credit strategies across different industries. For example, portfolios in industries with high concentrations of borrowers in sensitive segments may benefit from origination or exposure strategies that favor more resilient borrowers.   

Figure 4: Existing borrower resilience varied significantly between different industries. Personal Installment Loan borrowers were the least resilient overall. 

Figure 5 presents a similar comparison of new borrower resilience by different industries. New borrower sensitivity was again highest in the Personal Installment Loan view, while new borrower resilience was highest in the Auto Finance view.   

Figure 5: Sensitivity was highest among new Personal Installment Loan borrowers, while resilience was highest among new Auto Finance borrowers.  

Personal Installment Loan portfolios are therefore both the most sensitive portfolios overall and the portfolios adding the most sensitive new borrowers, which may indicate some urgency to revisit credit risk management strategies across the credit lifecycle in this dynamic industry.  

Key Takeaways 

• Monitoring portfolio resilience over time can help identify vulnerabilities to be addressed in account origination and/or account management strategies. 

• Credit portfolio resilience can vary significantly by industry, so benchmarks provide valuable points of comparison. 

How FICO’s Scoring Solutions Can Help Manage Credit Portfolios 

• Read more posts on scores, including posts on average FICO® Score benchmarks and drivers across the United States 

• Explore the FICO® Resilience Index  

• Learn more about credit portfolio management best practices or access the full set of benchmarking reports on which this analysis has been based - contact ScoreSupport@fico.com 

• Learn more about FICO’s other scoring solutions 

• Listen to our latest podcasts on how lenders and portfolio managers can gain deeper insight into borrower behavior during severe economic downturns, as well as the latest industry trends: 

• FICO® Score Insights Podcast: Exploring Consumer Credit Risk and Resilience  

• FICO® Score Insights Podcast: Credit Card Borrowing & Lending