Credit Scores on the Rise

Date: May 26, 2021

Yesterday, we released a press release announcing that we have a new interactive tool on our website that posts the monthly national average credit score, amongst other credit insights. As of April, the national average VantageScore credit score is 694. That is six points higher than it was 12-months prior. VantageScore has always led the credit industry in terms of transparency, and this is another example of that leadership.

Along with the national average credit score, we also include a heat map of the United States detailing what the average credit score is in each state. Geographic regions in the South and Midwest tend to have lower average credit scores than those in the Northeast and West coast.

And we also are posting how the overall scorable population (note: VantageScore provides a score to 94% of all adults over the age of 18) breaks down into what we call “risk tiers,” which are Super Prime, Prime, Near-Prime and Sub-Prime. The interesting trend here is that the population size of the Prime Segment has increased while the Sub-Prime population has decreased.

This information is free for anyone interested, and no sign-up information is required. Just click through to our website. The data is both interactive and downloadable.

Now, the aforementioned information certainly beg for some questions:

Are credit scores artificially inflating?

While it is true that things like government stimulus checks and limited reporting of delinquencies contribute to the rising credit scores, the rising credit scores also reflect that consumers have paid down balances on both installment loans and credit cards. So far, consumers exiting loan accommodation periods such as forbearances also have demonstrated an ability to continue to make on-time payments.

Generally, during this past year of unprecedented stay-at-home orders, consumers up until now have not had the ability to spend on things like dining out, vacations and entertainment. This is likely contributing as well. This could certainly change as consumers get back to normalized spending habits.

Should lenders and other users of credit scores be concerned?

We monitor the predictiveness of our models on a continual basis, and we can report that our models continue to perform well. For users of our model, we are happy to provide this information.

For these analyses, we use data that provides a nationally representative sample. This doesn’t necessarily reflect how a lender’s portfolio might perform, so lenders need to be extremely diligent about also performing supplemental analyses to manage risk.

Are all consumers doing well?

While the data paints a rosy picture, the COVID-19 pandemic recovery is likely lopsided. We need to pay close attention to segments of the population that are most vulnerable, whether it’s geographic or demographic, and create opportunities for financial success by prioritizing financial inclusion – in a safe and sound manner. That means, among many things, using more inclusive credit scoring models such as ours.

We will be addressing this further and deeper in our upcoming webinar along with Morgan Stanley titled, “Credit invisible no longer: Racial disparities in lending” next Wednesday, June 2. More on this in our newsletter. For now, you can CLICK HERE TO REGISTER.

Plenty more in this pre-Memorial Day issue of THE SCORE…Have a safe and happy Memorial Day weekend!

Best,

Barrett Burns

CEO and President, VantageScore Solutions