More consumers nearing perfect FICO® Scores, but are scores improving?

My colleagues in FICO Labs monitor FICO® Scores and how they move over time. In our most recent review, we continue to see the effects of consumers’ scores moving up AND down. At the high end of the score distribution, the number of consumers in the 800-850 range is at...

European Credit Risk Report Signals Recession (CNBC Video)

On CNBC Squawk Box Europe, EMEA Managing Director Mike Gordon discusses FICO's latest European credit risk survey. The survey shows that nearly eight out of ten European risk managers believe Europe will plunge back into recession this year. If you're unable to view the CNBC video above, view it here.

Strategic Defaults Not Going Away Anytime Soon

I’ve been blogging about results from our latest quarterly survey of US bank risk officers – specifically how they expect loan delinquencies to drop and credit availability to expand. Today, I’ll focus on survey results from the housing sector. Notably, nearly 2/3 of respondents think strategic defaults will be as...

European Credit Delinquencies Will Rise Further

The need for small business credit is making headlines in many European countries, with politicians often railing against banks for “withholding” credit. Anyone wondering why banks are being conservative with their lending should review the latest European Credit Risk Outlook released by FICO and Efma. According to more than 100...

Bankers getting ready to loosen the purse strings

In my last post, I discussed the optimism of US bankers regarding loan delinquencies in our latest quarterly risk survey. On another positive note, survey respondents also indicated that access to credit was likely to improve. When asked about credit availability over the next six months, the majority of respondents...

Optimism grows among US lenders

Are US bankers embracing the economic recovery? According to our latest quarterly survey of 200+ US risk officers, it certainly looks that way. This sentiment is in sharp contrast to the grim forecast expressed in our recent survey of European risk managers. The US survey showed that risk managers expect...

More bad news for Europe’s small businesses seeking credit

Small business lending has been a focus for most European nations, looking to increase economic growth and cut unemployment. The going hasn’t been easy, and it’s not going to get easier. Results of FICO and Efma’s latest European Credit Risk Outlook, which surveyed more than 100 credit risk management professionals...

Four out of five European bankers see another recession coming

The latest European Credit Risk Outlook, published by FICO and Efma today, provides a grim forecast for Europe. More than 100 credit risk management professionals across Europe answered the survey in January and February, and here’s some of what they said: 79 percent of respondents forecast a new European recession...

Consumer spending rises on UK cards

In today’s environment, even moderately good economic news needs to be celebrated. FICO just released card performance data from December 2011 that shows average sales per UK-issued card rose to a two-year high of just over £600. As reported in our news release, average card sales in December 2011 were...

Cutting capital requirements would increase lending

The Banker just published some interesting research on how lower bank capital requirements could boost the economy. Their numbers suggest that cutting capital requirement by just 1% would dramatically increase lending power, enabling the UK to increase bank assets by an amount equal to about 37% of GDP — for...

Russians' credit health is strengthening

Much of the focus on the Russian election this week has put a spotlight on how far the country has come since perestroika and the end of the Cold War. Yesterday FICO released our own analysis on an interesting part of the country’s picture: the credit health of Russian consumers....

Balancing risk and growth in APAC

I've been blogging about FICO’s most recent quarterly survey of U.S. bank risk professionals, which included questions about global issues that could put pressure on the U.S. economic recovery. In my last post, I highlighted a noteworthy finding from respondents about China's economic growth as it relates to the future...

Global concerns impacting U.S. economy

In my last post, I shared the results of our quarterly survey of U.S. bankers that showed serious concerns about delinquencies on student loans, mortgages and credit cards. In that same survey, we asked about global issues that could put pressure on the U.S. economic recovery. When asked about the...

FICO CEO discusses risk survey on Yahoo! Daily Ticker (video)

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Student Loans Seen as Next Casualty of Sluggish Economy

The results of our quarterly survey of U.S. bank risk professionals are in. The number that really jumps out to me is 67%. That’s how many of our respondents expect delinquencies on student loans to rise. In the nearly two years we’ve been conducting these surveys, expectations for delinquencies on...

Webinar: Post-Crisis Analytics – 6 Imperatives for Raising Performance

In dynamic markets, there’s direct relationship between profitable portfolio growth and a bank’s ability to quickly understand and adapt to changing consumer behavior. At next week's free webinar "Post-Crisis Analytics – 6 Imperatives for Raising Performance," FICO will explore how card issuers can build competitive advantage by cultivating analytic learning...

Inextricably Linked, for Better or for Worse

Last week, more than 30 senior risk officers from 12 countries across Asia Pacific gathered at the second annual FICO APAC Chief Risk Officer Forum in Bali, Indonesia. Hosted by FICO and moderated by IDC, the forum provided a venue for us to have an in-depth discussion around what’s ahead...

Is the Chinese Consumer Ready to Drive Global Economy?

As we approach the end of the year, I’m having numerous discussions with banking executives and other clients about where we see the global and local Asia Pacific economy performing next year. I was asked to opine on this for Singapore’s business daily, Business Times. In short: Globally, it often...

Rising Stars v. Fallen Angels: Insights into changing credit behavior

FICO® Score migration patterns offer significant insight into consumer credit behavior. There's much to be learned by exploring these patterns—particularly whose score went up, whose went down and whose stayed the same—during dynamic economic times. We've just published new research analyzing score movement during recent economic volatility, from October 2006...

UK cardholders paying less of their card balances

FICO has just released UK card data for September that shows a worrying pattern. The percentage of their balance that holders of classic cards paid off in September hit a two-year low. Combined with a rise in cash usage and lower average credit lines, the data suggests that consumers are...

European borrowers headed for trouble

The latest European Credit Risk Outlook, based on a survey of risk managers by FICO and Efma, gives a different picture than the one we released in June. The optimism in that report has largely slipped away. Credit risk managers across Europe now expect that more consumers will have trouble...

Needed: A consumer-led recovery

In his keynote address at FICO World 2011 this morning, FICO CEO Mark Greene laid out an imperative for economic recovery. Banks, he said, need to rebuild the relationship with consumers. Mark cited the recession of 2008 as the first since World War II that was consumer-triggered, starting with consumer...

Recession causes FICO® Score swings

Last month I posted that the national distribution of FICO® 8 Scores has had two major shifts during the recession. Some readers were puzzled that the observed shifts weren’t significantly larger, in light of the sour US economy. Actually, what appear to be small national shifts are quite dramatic changes,...

How do you treat a strategic defaulter?

As I've mentioned previously on this blog, strategic defaulters have a unique set of characteristics not found among other defaulters. That means traditional account management and collections methods are less effective with them. So what's a mortgage servicer to do? Segment populations based on the dual dimensions of credit risk...

FICO Analysis: Strategic Default Problem Grows

A recent FICO data analysis found more than six million U.S. homeowners have a current-loan-to-value ratio of 120 or higher, meaning they are at least 20 percent underwater on their mortgages. Based on recent data from Fannie Mae, these homeowners are more than twice as likely as other borrowers to...

Consumer credit is still dicey

In my last blog post, I noted that the results of our quarterly survey of bank risk managers were quite negative on the topic of residential real estate. Unfortunately, the bad news didn’t stop there. When asked their opinions about consumer credit over the next six months, a large number...

Is it really all doom and gloom in the U.S. housing sector?

In our latest quarterly survey of U.S. bank risk professionals, respondents offered an outright dismal picture of the housing sector. When asked if U.S. housing prices would climb back to 2007 levels before the year 2020, 49 percent of respondents said no. By comparison, only 21 percent said yes. And...

UK card data shows rise in cash withdrawals

FICO just released data on Q2 cards performance in the UK. In large part, we’re seeing steady patterns, with higher volatility and risk for both student and Irish cards. One area that shows a slight increase in risk is cash withdrawals. Cash withdrawals as a percentage of total sales for...

Restoring banking balance

In August, I blogged about the notable regulatory guidance issued by the Monetary Authority of Singapore, which called for increased capital levels and – more significantly – an accelerated timeline mandated by Basel III. I also talked about the three key lessons from global financial crisis: More capital. More liquidity....

FICO® Scores Shift During Recession

A comparison of nationwide FICO® Scores from 2005-2011 illustrates that score distribution has remained relatively stable at a national level. However a close look at the numbers suggests that U.S. lenders have experienced two distinct phases of consumer credit risk in the recession thus far. Early in the recession, lenders...

Brazil takes a positive step forward in data sharing

Although the use of positive bureau data for credit decisions is quite new in Latin America, it’s gaining increased visibility. In Brazil, a bill creating a positive bureau was signed by president Dilma Rousseff just months ago, after an eight-year fight. The bill will take time to be fully implemented,...

Bloomberg TV: FICO CEO on Consumer Confidence and the Recovery (video)

On Bloomberg Television's "Countdown," FICO CEO Mark Greene discusses U.S. consumer credit, credit card use, and the U.S. and U.K. housing markets. To watch the video above, view it here.

Why increased capital adequacy is only part of the solution

We’ve blogged a lot about the various proclamations of the Basel Committee, specifically how our banking clients around the world are using analytics to ensure capital adequacy and manage portfolio risk. Under the most recent Basel III measures, banks would have to hold six percent of Tier 1 capital, up...

Concern about housing sector still running high

In our latest quarterly survey of bank risk professionals, we found a strong negative outlook for the housing sector. Of course, this isn’t new. It continues a trend we’ve seen for a long time. While 18% of respondents expected mortgage delinquencies to decline over the next six months, 46% expected...

Bankers lose a bit of confidence in small businesses

In our quarterly survey of bankers, we look at banker sentiment for both consumer and small business credit. Unlike our findings related to consumer credit, bankers are somewhat pessimistic about the small business sector. Sentiment in Q2 reverted to the pessimism of 2010 after a brief improvement in the first...

Yahoo Daily Ticker: FICO CEO on the Outlook for Consumer Credit

On the Yahoo! Finance Daily Ticker, FICO CEO Mark Greene discusses FICO’s new US credit risk survey and the outlook for consumer credit. View the video below, and read the full article, "Consumer Credit Improving, but Housing to Remain a Drag: FICO survey."

FICO discusses consumer credit demand on CNBC Europe

On CNBC Europe, FICO VP and EMEA Managing Director Mike Gordon discusses FICO's European credit risk survey and the state of consumer credit demand: "The consumers are going to be driving more and more savings into the banks, but they're going to be demanding less credit instruments. Six months ago,...

Cautious optimism regarding consumer credit

As we do every quarter, we conducted a survey of U.S. bank risk professionals in Q2. Our survey found that bankers are cautiously optimistic about the financial health of consumers. We found that 38% of respondents expected credit card delinquencies to remain flat, while 31% expected them to fall, and...

Bloomberg TV: FICO CEO Discusses Jobs Data, Economy

FICO CEO Mark Greene discusses the June U.S. jobs report, and the outlook for the housing market and consumer confidence on Bloomberg Television's "InBusiness With Margaret Brennan." (Source: Bloomberg) If you're unable to see the video above, view it here.

European lenders rank profit-building measures

With European banks under pressure on capital, fees, margins and just about everything else, lenders are considering a number of options for improving profitability. In the second European Credit Risk Survey, conducted by FICO and Efma, lenders put the likely options in this order. The figures show the percentage of...

Closing the credit gap in Europe

In the recent European Credit Risk Survey conducted by FICO and Efma, credit risk managers across Europe said they expected the “credit gap” between demand and supply to narrow, compared with their outlook earlier this year. More risk managers now see the amount of credit issued rising. Nearly 30 percent...

Mortgages are sore spot in European credit forecast

According to European credit risk managers in the second European Credit Risk Survey conducted by FICO and Efma, the delinquency picture is mixed. Overall, respondents’ outlook for the next six months is mixed, but the results were slightly better than the last survey (February 2011) for most credit products. Where...

What Makes a Score “Fair”?

In writing my last post about legislative and consumer pressures to modify credit scores, often to make them “fair,” I began thinking about what does make a score fair. Legislators and regulators look for fair lending. The U.S. Fair Credit Reporting Act governs much of what FICO does when we...

Subjective Tinkering of Credit Scores is Bad Policy

Recently I made a case against a new IRS policy to withdraw tax liens from the credit bureau files of delinquent taxpayers who eventually pay their overdue bills. This subjective tinkering with empirically developed credit scoring only ends up hurting consumers, particularly those who legislators are trying to protect. It...

Strategic default: More than an ethics debate

Strategic defaults and the changing consumer stigma around defaulting on a mortgage make for an interesting ethical debate, argued in media outlets ranging from the Chicago Tribune to The PBS NewsHour. But ethics aside, let's not lose sight that strategic defaults have negative consequences for consumers, servicers and investors. Consumers...

Video: What's the profile of a strategic defaulter?

More American homeowners are choosing not to pay their mortgage, a phenomenon known as strategic default. In this video, Andrew Jennings, FICO's chief analytics officer, shares FICO Labs findings about new analytics for predicting strategic default and the profile of a strategic defaulter. If you have difficulties with the embedded...

Predicting strategic default

The incidence of strategic default is on the rise. But before mortgage servicers can take action, they first must be able to identify strategic defaulters. Standard credit risk scores aren't sensitive to the quite different characteristics of these voluntary strategic defaulters, whose behavior is driven by incentive to pay rather...

Who are your strategic defaulters?

Accurately predicting strategic default risk remains a big challenge for mortgage servicers. Because strategic defaulters behave differently from traditional mortgage defaulters, it's quite difficult for servicers to identify consumers with the greatest potential to strategically default. And after all, you can't predict what you can't measure. FICO recently conducted research...

Survey reveals issuer response to the CARD Act

When the CARD Act went into effect last year, compliance and rising delinquencies commanded the attention of card issuers, often at the expense of revenue-generating activity. A recent FICO client survey asks: have issuers turned the corner? To find answers, we asked a range of both large and small issuers...

More Hopeful Signs in Latest Banker Survey

As I mentioned a couple days ago on the blog, FICO’s most recent quarterly survey of bank risk officers gave us plenty of positive signals. In addition to anticipating a drop in delinquencies, bankers are expecting the “credit gap” to narrow in the coming months. Our survey of more than...

FICO CEO on CNBC Squawk Box: Credit Where It’s Due

On CNBC Squawk Box, FICO CEO Mark Greene discusses results from a new FICO survey of risk managers, as well as key issues affecting US consumer credit health. For those who can't see the embedded video above, view it here.

Finally … Optimism Among U.S. Bankers

Each quarter we survey a couple hundred bank risk officers about their expectations for consumer (and small business) credit. As you might expect, there was a lot of pessimism throughout 2010. But in our Q1 2011 survey, we found a big change … bankers are becoming optimistic! Most notably, respondents...

Research looks at how mortgage delinquencies affect scores

How much impact does a short sale have on FICO® Scores? How about a foreclosure? Since I frequently hear these questions from clients and others, I thought I’d share new FICO research that sheds light on this very subject. The FICO study simulated various types of mortgage delinquencies on three...

Post-crisis risk management

The advent of the economic crisis caused some core beliefs in traditional risk management to be tested. We had our very own stress test, not just of the portfolio but also of the tools used to manage that portfolio. As our models came under stress, regulators changed the rules that...

Analytic Imperatives for a Post-Crisis World

How have analytic priorities changed as a result of the economic crisis? In this Tech Talk, FICO Chief Analytics Officer Andrew Jennings lays out new directions for analytics. He discusses the concepts of modeling decisions and predicting the impact of economic changes, and stresses the importance of the analyst/modeler, saying...

Withdrawing tax liens unwise

You’ve probably heard that the IRS will now make it easier for delinquent taxpayers to have tax lien records completely removed from credit bureau files. The taxpayers need to pay their overdue tax bill in full or simply agree to a direct-deposit arrangement for paying the overdue tax. So instead...

Redefining the Path to Profitability

As lenders are developing their post-recession investment and growth plans, they are taking the recent pause in growth as an opportunity to examine alternative methods to add value for both themselves and their customers. While this has been evolving over many years outside of the United States, the movement has...

Credit Scores and Counter-Cyclical Risk Management

Basel III regulations call for banks to adopt a counter-cyclical approach to managing risk and capital. To avoid creating credit bubbles or prolonging economic recessions, risk measures should reflect the effect of the next economic cycle. FICO's David Molyneaux explains in this Tech Talk. Credit Scores & Counter-Cyclical Risk Management...

Will Europe see a wider credit gap?

In the new European Credit Risk Outlook report issued by FICO and Efma, risk managers across Europe weigh in on credit supply and demand. With the pressure on for banks and other lenders to fuel economic growth through making credit available, will the supply meet the demand? Respondents in most...

How will regulations affect Europe's credit supply?

What do European credit risk managers see ahead for credit supply and demand? That’s what FICO and Efma asked in the first European Credit Risk Survey, and the report, released today, shows a mixed response. One thing risk managers across Europe agreed on is that regulations are likely to tighten...