Disturbing Trends In FICO Scoring
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It is rather amazing how long it takes mainstream media to catch on to something that many bloggers knew was happening well over a year ago.
Please consider this "no-news" announcement from Fair Isaac appearing on BusinessWire: FICO Spots Disturbing Trends in Consumer Credit Behavior.
MINNEAPOLIS, Feb 23, 2010 (BUSINESS WIRE) -- FICO (FICO) , the leading provider of analytics and decision management technology, today announced new and troubling findings uncovered in the latest analysis offered by its subscription service for businesses, FICO(R) Score Trends. Reversing a long historic trend, mortgage default risk for consumers with high FICO(R) scores now exceeds their credit card default risk, even though most credit cards are unsecured credit and mortgages are secured by real estate. The company observed a parallel rise in mortgage delinquencies for higher-scoring U.S. consumers.Supposedly this is news.
According to the analysis in FICO Score Trends, recent repayment behavior across the financial services industry has shifted significantly from historical trends. In 2008-2009, bankcard accounts were just 1.6 times more likely to become 90 days delinquent than were mortgage loans. By comparison, in 2005 bankcard accounts were more than three times more likely to become 90 days delinquent. And for borrowers scoring high on the FICO(R) score's 300-850 score range, the level of repayment risk actually has become greater for real estate loans than for bankcards. In 2009, 0.3 percent of consumers with FICO scores between 760-789 defaulted on real estate loans, compared to 0.1 percent who defaulted on bankcards.
"We're identifying lending industry situations in FICO Score Trends that to our knowledge have never been seen before," said Dr. Mark Greene, CEO of FICO.
A quick search would show that Calculated Risk, Yves at Naked Capitalism, Barry Ritholtz at the Big Picture, Karl Denninger at Market Ticker, myself and most likely hundreds of others bloggers were aware of this trend well over a year ago and probably longer.
Fair Isaac is pathetically late to the party with this non-news announcement. But hey, it never hurts to get your name in the news.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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