http://ficoforums.myfico.com/t5/myFICO-Blog/Is-Growing-Student-Loan-Debt-Impacting-FICO-Scores/ba-p/1610138 <p><em>This guest post by Frederick Huynh&nbsp;originally appeared in the <a href="http://bankinganalyticsblog.fico.com/" target="_blank">FICO Banking Analytics Blog</a>.&nbsp;</em></p> <p>&nbsp;</p> <p>&nbsp;</p> <p>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.</p> <p>&nbsp;</p> <p>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%.</p> <p>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 other types of debt, as the chart below shows.</p> <p>&nbsp;</p> <p><a class="asset-img-link" style="display: inline;" href="http://www.edmblog.com/.a/6a00d83451629b69e2017d3c502221970c-pi" target="_blank"><img class="asset asset-image at-xid-6a00d83451629b69e2017d3c502221970c" src="http://www.edmblog.com/.a/6a00d83451629b69e2017d3c502221970c-800wi" border="0" alt="StudentLoan-Chart2" title="StudentLoan-Chart2" /></a></p> <p>&nbsp;</p> <p>More consumers are shouldering a greater amount of student loan debt today. We found that the percentage of consumers with student loan debt above $100,000 has more than tripled between 2005 and 2012, from 0.2% to 0.7%. To put this in perspective, about 1 million more consumers have student loan debt above $100,000 (assuming 200 million scorable consumers).</p> <p>&nbsp;</p> <p>Does carrying high student loan debt mean that a consumer's FICO® Score is destined to be low?</p> <p>&nbsp;</p> <p>Our research demonstrates that this isn’t the case. In fact, as the graph below shows, people can have good scores despite having high student loan balances. Approximately 7% of consumers with at least $50,000 of student loan debt have FICO® Scores in the 800s.</p> <p>&nbsp;</p> <p><a class="asset-img-link" style="display: inline;" href="http://www.edmblog.com/.a/6a00d83451629b69e2017d3c50406f970c-pi" target="_blank"><img class="asset asset-image at-xid-6a00d83451629b69e2017d3c50406f970c" src="http://www.edmblog.com/.a/6a00d83451629b69e2017d3c50406f970c-800wi" border="0" alt="FICO_score_range" title="FICO_score_range" /></a></p> <p><br />Before I wrap up my post, I’d like to set the record straight on exactly how student loan debt is factored into the FICO® Score:</p> <p>&nbsp;</p> <p>&nbsp;</p> <ul> <li>A student loan receives no special treatment by the FICO® Score; it is treated like any other installment loan. The score doesn't employ any variables that specifically evaluate student loan data.</li> <li>It makes no difference to the score if the student loan is backed by the government or a private loan from a lender.</li> <li>Whether a student loan is deferred has no impact. Deferred loans, if reported by lenders, are considered by the algorithm and can have a positive, negative, or no impact on the score, depending on what other credit information is present.</li> </ul> <p>&nbsp;</p> <p>Lastly, it's important to note that while student loan debt can factor into the FICO® Score, credit card debt has a larger influence. That's because we've found that credit card indebtedness has a stronger statistical correlation with future borrower performance than installment loan indebtedness.</p> Wed, 26 Sep 2012 19:09:55 GMT Sarah 2012-09-26T19:09:55Z http://ficoforums.myfico.com/t5/myFICO-Blog/Is-Growing-Student-Loan-Debt-Impacting-FICO-Scores/ba-p/1610138 <p><span>As students incur more student loan debt, lenders and investors in student loans are asking how this is affecting US consumers&rsquo; FICO&reg; Scores. New FICO research provides interesting insights.</span></p> <p><span>&nbsp;</span></p> <p>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%.</p> <p>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 other types of debt, as the chart below shows.</p> <p><span>&nbsp;</span></p> Wed, 26 Sep 2012 19:09:55 GMT http://ficoforums.myfico.com/t5/myFICO-Blog/Is-Growing-Student-Loan-Debt-Impacting-FICO-Scores/ba-p/1610138 Sarah 2012-09-26T19:09:55Z