C. Myblog

43.4 Million People…

October 7, 2010

Consider that…

“25.5% of consumers, nearly 43.4 million people now have a credit score of 599 or below.”

Who knows where credit ratings will be when the economy settles down.  We think it would be helpful for decision-makers to have a strategic discussion on the role credit scores will play in lending decisions:

  • Will the whole scale ultimately end up shifting to a new norm?
  • How will underwriting processes and criteria change?
  • How will borrowers with strategic defaults be evaluated?
  • What might be the impact to pricing?

These are just a few more things to think about in a world of “unusual uncertainty.”

Source:  CNBC quoting figures provided by FICO, Inc., 7/12/10

Showing 2 comments
  • Jim Ott

    We’ve had these same discussions about potential opportunites to lend to members with lower FICO scores and those with strategic defaults. From one perspective, people who are walking away now from upside down mortgages are smart investors. Can we blame them for defaulting at a historic time in the wake of the real estate meltdown?

    Going forward, and once real estate values stabilize, these people may be better qualified for mortgage loans because they were able to retain more of their personal net worth.

  • c. myers

    Good point. Many credit unions are struggling with the same question. Some credit unions feel that these people will need to be included in the market and will have more available money, as you pointed out. On the other hand, others believe that those who have strategically defaulted have proven their willingness to break a contract with their financial institution–and may be more apt to do it again in the future.

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