Dark Clouds Looming Over Student Loan Industry

Graduation-cap-made-of-money-300

My earlier blog post quantified some of the trends we have been seeing in the US student loan industry, namely the precipitous increase in student loan debt.   Our ongoing analysis has found another disturbing trend: recent vintages of student loans have noticeably lower FICO® Scores than earlier vintages.   This chart illustrates the score distribution trend for consumers who have recently opened a new student loan.     Here we see a clear shift toward lower scores. In fact, the median score has dropped 17 points from 659 to 641.     These findings indicate that in recent years, student loan lenders have made student loans available to more consumers with lower credit quality. Since private student loan lenders were … [Read more...]

Cyber Theft Meets Cyber Monday

IDtheft

The Monday following Thanksgiving, now known as Cyber Monday, has become one of the bumper sales days across electronic commerce sites.   Every year the absolute volumes of online sales increases, as does the proportion of electronic commerce spend compared to traditional spend at physical retailers. This shift in consumer behavior has also attracted those from the criminal fraternity, who are seeking to capitalize on consumer’s lack of knowledge about safe online shopping.   The continued strength of "card not present" fraud losses shows that people continue to be duped into providing their credit or debit card credentials in an insecure manner or to unauthorized sources, particularly when online. Customer education and awareness is imperative.   Shopping … [Read more...]

Student Loan Debt and FICO Score Trends

  As students incur more student loan debt, lenders and investors in student loans are asking how this is affecting US consumers’ FICO Scores. New FICO research provides interesting insights.   With education costs rapidly outpacing inflation, more consumers are taking out student loans to pay for their education. Looking at a large data sample from a credit reporting agency, we found that 6.2% of US consumers had two or more open student loans on their credit report in 2005. By 2012, that number grew to roughly 11.8%.   Consumers also have a greater amount of student loan debt today. In 2005, consumers with an open student loan on file had an average student loan debt of $17,236. In 2012, that number increased 54% to $26,549. This has outpaced growth for … [Read more...]

FICO Scores Reveal Slow Economic Recovery

FICO Scores Reflect Slow Economic Recovery

Our FICO Labs team has taken a fresh look at national distribution of FICO Scores. With a couple of interesting exceptions, we found that consumer scores are continuing their slow return to a pre-recession pattern.       The first two years of the recession (2008-2009) moved the scores for millions of people into the lowest (300-499) and the highest (800-850) segments of the FICO Score range. Correspondingly fewer people had scores in the middle range (600-749). In an earlier post, I explained why these separate shifts happened.   This flattening of the distribution curve peaked in 2009-2010 and has since slowly been reversing. However, the latest numbers suggest two unusual patterns in this recovery. First, the quantity of people with very low … [Read more...]

Disclaimer: This content is not provided or commissioned by a credit card issuer. Opinions expressed here are the author's alone, not those of a credit card issuer, and have not been reviewed, approved or otherwise endorsed by a credit card issuer. This site may be compensated by credit card issuers mentioned on the site by such companies.