Credit, credit, credit.
We hear a lot about credit and debt, creditworthiness, credit history, credit scores. Just how are Americans handling the changing credit scene? It seems consumer credit behavior is steady.
FICO, the agency that many organizations turn to for credit scoring, has done some research on what’s happening with credit scores since the economic downturn. There are almost as many Americans with improving credit scores as there are Americans with declining scores.
Most bank risk managers surveyed by FICO in the third quarter of 2011 were pessimistic. Those surveyed anticipate more consumers will be delinquent with residential mortgages, auto loans, credit cards, and student loans.
According to FICO, consumers whose credit scores dropped recently are much different than those whose scores dropped early in the economic crisis. Mortgage pressures were not as much of a factor in severe delinquencies than formerly assumed.
FICO research shows “consumers who defaulted after 2008 look more like good consumers than those who defaulted between 2005-2007. They were on the books longer, had fewer months of minor delinquency prior to the default, and have higher scores even after the default. They also defaulted for more money: The average balance on defaulted accounts in 2008-2010 was $5,543 compared to $4935 in 2005-2007.”