Personal Loan Category Shows Some Signs of Increased Default for VantageScore® Credit Scores Below 700
The default risk that a credit score represents changes over time due to shifts in the economy and consumer credit behaviors. That said, the latest quarterly data refresh of RiskRatio powered by VantageScore™ indicates that overall, across product categories, delinquency rate (90+ days past due) stayed consistent based on the Q3 2022 data refresh. This means that the score-to-risk relationship that compared Q2-2020 through Q2–2022 remained consistent when compared to Q3-2020 through Q3-2022.
RiskRatio is indicating some bifurcation in the Personal Loan category for consumers with scores below 700. A 1% increase in delinquency rates is observed when Q3 2022 is compared to the Q2 2022. Lenders in this category must closely examine their portfolios to ensure loss rates are at expected levels.
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Key Take-Ways
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Score-to-Risk Relationship Stays Very Consistent Throughout 2022
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Slight increase in default rates associated with scores below 700 in the personal loan category
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Macro-economic volatility could cause score-to-risk relationship to further shift.
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Lenders can leverage RiskRatio to ensure changes are identified and considered in credit policy decisions.
