Bankcard delinquency has risen 48% since 2021
Credit Scores Dip as Consumers Reprioritize Payment Habits
Consumers are making strategic choices to protect essential assets and manage financial obligations, a trend that has led to a dip in average FICO scores over the past year. Student loan debt and the resumption of delinquency reporting are playing a major role in driving this overall decrease, especially for younger Americans.
Consumers are now 19% more likely to pay auto loans than mortgages, and mortgages are 56% more likely to be paid than personal loans. Personal loans are being prioritized more than bank card payments, with student loan repayment ranking last, according to FICO’s inaugural credit insights report.
The average FICO score for Gen Z consumers fell three points year-over-year, compared with a two-point decline for the total population, according to the report. Just over a third of 18- to 29-year-olds hold student loans, compared with just 17% of the total population. This has led to greater financial volatility among the Gen Z cohort and a higher FICO point swing than the national average.
The percentage of people who fell into the middle score range of between 600 and 749 has shrunk since 2021, from 38.1% to 33.8% this year. As a result, the distribution into the highest and lowest score brackets increased.
“The data reflects a K-shaped economy, where consumers are experiencing different financial outcomes but also adapting in meaningful ways,” said Tommy Lee, senior director of predictive scores and analytics at FICO. “We’re seeing a reordering of payment priorities, with auto loans now surpassing mortgages at the top and student loans at the bottom.”
Screen Your Tenant Today!
Gain peace of mind with AAOA’s credit, criminal, and eviction reports.
Delinquency rates for auto loans have increased 24% since 2021, while mortgage delinquencies are up 58% over the same period. Bankcard delinquency has risen 48% since 2021 as utilization has climbed to 35.5%. Meanwhile, delinquencies on personal loans declined from recent peaks as underwriting standards tightened, said the report.
Americans have opened new credit and relied on existing credit to manage financial needs, according to a FICO survey. About a quarter of Americans reported that they have opened a new credit card in the past year, while 13% have opened a new personal loan as a financial cushion.
About half of Gen Z said they have relied on credit cards or Buy Now, Pay Later (BNPL) loans to make ends meet when faced with job loss or income reduction over the past 12 months. Student debt holders were even more likely to rely on short-term credit to help cover expenses.
Credit awareness remains strong, the survey found. Nearly three-quarters of Americans indicated they check their credit scores multiple times per year, and more than half checked at least once. Nearly half of both Gen Z and Millennials say they monitor their scores monthly, suggesting a growing interest in maintaining financial health, according to FICO.
Source: GlobeSt.
Accessibility