Delinquency Rate by FICO Score Range by wuzhenguang

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									FICO Scores

             John Meeks
 Federal Deposit Insurance Corporation
 What is your most valuable asset?


Frank Abagnale of Catch Me if You
Can fame once remarked that if you
don t own a house it is most likely your
credit score!
     The Cost of Lower Credit Scores
       $250K 30 yr fixed mortgage as of 5/10/2011

FICO Range   APR% Mo. Paymt Life of loan cost
760-850      4.36 $1,256          0
700-759      4.58 $1,279          $11,880
680-699      4.76 $1,305          $21,240
660-679      4.97 $1,338          $33,120
640-659      5.40 $1,404          $56,880
620-639      5.94 $1,491          $88,200
       What is a FICO Score?

Ø  A measure of risk in lending

Ø  Developed by the Fair Isaac and Co.

Ø  The three major credit reporting
    agencies have their own names:

     Equifax = BEACON Score
     Experian = Experian/Fair Isaac
     TransUnion = EMPIRICA
       Score Range
FICO scoring ranges from 300 to
850.

 (VantageScore was developed
 by the three major credit
 reporting agencies to provide
 consistency in scoring and it
 scores from 501 to 990.)
FICO Score Distribution – skewed to
      high end of the scale
FICO Score Distribution – skewed to
      high end of the scale
The average score is 687 but the
median score is 723 – half the
population have a 723 or better.
Demographic Differences
        Age
    Demographic Differences
            Race
    Missouri Dept of Insurance study
Comparing credit scores by zip code found
minority neighborhoods averaged scores
in 17th percentile (about 550) while non-
minority neighborhoods averaged in 57th
percentile (about 700).

    Texas Department of Insurance study
African-Americans and Hispanics made up
60% of worst scores and only 10% of best
scores.
Lower scores (or no score) mean
fewer credit opportunities and more
dependence on predatory lenders!
          Delinquency Rates
Credit Score exist because they accurately predict
                delinquency rates

 Delinquency Rate by FICO Score
 Range:
        300-499         87%
        500-549         71%
        550-599         51%
        600-649         31%
        650-699         15%
        700-749          5%
        750-799          2%
        800-850          1%
Delinquency Rate by FICO Score
Range:
       300-499              87%
       500-549              71%
       550-599              51%
       600-649              31%
       650-699              15%
       700-749 (723 median)   5%
       750-799               2%
       800-850                1%
FICO Factors Weighting
       FICO Factors Weighting
            Payment History – 35%

•    Account payment information
•    Bankruptcy, judgments, suits, collections
     activity
•    Severity of delinquency
•    Amount past due or in collection
•    Recency of past due items
•    Number of past due items
•    Number of accounts paid as agreed
       FICO Factors Weighting
             Amounts Owed – 30%

•    Amounts owing on accounts
•    Amounts owed on specific account types
•    Number of accounts with balances
•    Proportion of credit lines used
•    Proportion of installment loan amounts still
     owning
       FICO Factors Weighting
       Length of Credit History – 15%

•    Time since accounts opened
•    Time since accounts opened by account
     type
•    Time since account activity
       FICO Factors Weighting
          Type of Credit Used – 10%

•    Number of (presence, prevalence and
     recent information on) various account
     types – credit card, retail, installment,
     mortage, consumer finance
       FICO Factors Weighting
               New Credit – 10%

•    Number and proportion of recently opened
     accounts, by account type
•    Number and time of recent credit inquiries
•    Time since recent account openings, by
     account types
•    Re-establishment of positive credit history
     following past payment problems
     Everyone is different
The importance of any factor depends on the
overall information in your credit report.
For some people, a given factor may be more
important than for someone else with a different
credit history. In addition, as the information in
your credit report changes, so does the
importance of any factor in determining your
FICO score. Thus, it's impossible to say exactly
how important any single factor is in determining
your score - even the levels of importance shown
here are for the general population, and will be
different for different credit profiles. What's
important is the mix of information, which varies
from person to person, and for any one person
over time.
Bad Credit Data – Credit Score
      Points Deduction
     If you are a:      680       780

Maxed out credit card   10-30     25-45

30-day late payment     60-80     90-110

Debt Settlement         45-65     105-125

Foreclosure             85-105    140-160

Bankruptcy              130-150   220-240
     FICO 08 Scoring Changes
  (not all lenders have adopted the new
                  model)
Minor one-time delinquencies ignored

Small (under $100) collection actions ignored

Delinquencies more than 2 years old stressed less

High credit utilization a greater factor

Credit piggybackers weeded out – authorized users
on account only to inflate their credit score
                        Tips
Best way to get and keep good credit scores is
to pay your bills on time.

Have a variety of credit types, but don t get credit
that will be abused.

Keep your ratio of credit availability to credit use at
about 35%.

Check your credit reports every year –
  www.annualcreditreport.com
    Thank you



    John Meeks
919-787-8727 x4915
  jmeeks@fdic.gov

								
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