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 other types of debt, as the chart below shows.
Our FICO Labs team has taken a fresh look at national distribution of FICO® 8 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).
It's official... the term "underwater"—as applied to a mortgage loan—has made this year’s list of new words added to the Merriam Webster Dictionary. It not only reflects a mainstream recognition of this unfortunate trend, but is also sobering reminder of today’s economic reality: homeowners’ equity has been halved since 2005, leaving more than 15 million consumers underwater on their mortgages, and more than 6.5 million of those 30% or more underwater.
bySarah09-04-201209:33 AM - edited 10-31-201211:40 AM
It’s never too early to start teaching your kids about good personal finance. A few key, simple lessons about money at even a very early age will create a strong foundation of good financial habits that will benefit them for years to come. Here are some quick tips for easy finance lessons at any age:
Food isn’t free. Take your children with you while you grocery shop and tell them what different items cost. Explain that you can only buy what you can afford.
Start a piggy bank. Give your child his or her own personal piggy bank and make rules about when it can be emptied.
myFICO is the consumer division of FICO. Since its introduction 20 years ago, the FICO® Score has become a global standard for measuring credit risk in the banking, mortgage, credit card, auto and retail industries. 90 of the top 100 largest U.S. financial institutions use the FICO Score to make consumer credit decisions.