FICO® Scores Used in Over 90% of Lending Decisions According to New Study
Mercator Advisory Group study finds that U.S.
asset-backed securitizations for credit cards as well as auto loans and leases almost
universally cite the FICO® Score
MAYNARD, MA —February 27, 2018
New research from Mercator Advisory Group has found that in the United
States, FICO® Scores were
in 2016 used in more than 90% of lending decisions, including credit cards, mortgages,
and automobile financing. In addition, Mercator performed a study of the
frequency in 2016 and 2017 of FICO Score usage in the securitization process
for U.S. asset-backed securities (ABS) backed by automobile leases, credit
cards, prime auto loans, and subprime auto loans. The study found that ABS
securitizations in those four verticals almost universally cite the FICO Score.
as lenders rely on the effectiveness of the FICO Score, investors use FICO
Scores as a resource to assess portfolio quality,” said Brian Riley, director
at Mercator Advisory Group’s Credit Advisory Service. “We found that FICO
Scores were used in almost all of the public and private offerings in 2016 and
2017. Public offerings were particularly strong users, with 98.4% of the
securitization dollars referencing the FICO Score.”
Consumer credit of all types is on the rise. Revolving and nonrevolving credit outstanding balances increased
more than 20% between 2013 and 2017, from $3.1 trillion to $3.8 trillion, according
to the Federal Reserve. Credit scores allow financial institutions to make quick, often
real-time acquisition decisions and allow for credit quality assessments as
borrowers transact and maintain their accounts.
Scores can also help investors make decisions with the same confidence offered
to the financial institutions underwriting, servicing, and bearing the credit
risk. Mercator Advisory Group reviewed all securitization filings for the full
years of 2016 and 2017 and examined how each securitization leveraged a credit
score. Once it was determined whether or not the securitized instrument used a
credit score, Mercator audited the report to determine if the FICO® Score or
any other credit score was referenced. FICO Scores were solely cited in 284 of
the 296 asset-backed securitizations, representing 95.9% of the securitizations
and 98.2% of total dollars in U.S. securitizations. For
more discussion of scoring and this study, see Brian Riley’s blog here.
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About Mercator Advisory Group
Mercator Advisory Group
is the leading independent research and advisory services firm exclusively
focused on the payments and banking industries. We deliver pragmatic and timely
research and advice designed to help our clients uncover the most lucrative
opportunities to maximize revenue growth and contain costs. Our clients range
from the world's largest payment issuers, acquirers, processors, merchants and
associations to leading technology providers and investors. Mercator Advisory
Group is also the publisher of the online payments and banking news and
information portal PaymentsJournal.com.