Systemic Shifts in Consumer Risk
January 2010
The effects of the credit crunch, the recession and lagging unemployment continue to negatively impact consumer credit management behavior. VantageScore
Solutions' latest analysis confirms that risk is shifting from sub-prime consumers into the prime and super-prime credit quality tiers.
We analyze consumer credit data annually on a June-to-June basis using a two-year time window. The report summarizes the increasing risk among prime and super-prime consumers with single family mortgage loans, bankcards and auto loans. In all instances, we have seen credit risk rise with each two-year window, beginning with the June 2003 – June 2005 timeframe.
With portfolio exposure continuing to increase and now shift, lenders should be continuously reviewing score cutoff strategies and validating their score models. These trends may impact loan loss reserves, consumer lending and risk acceptance strategies as well as valuations of asset-backed securities.
Finally, we’re beginning to see some slight shifts in mortgage payment behavior, as seen on the last page of our results. While, given the size of our database, this shift in payment hierarchy is not yet statistically material, the apparent change in behavior has appeared on our radar for the first time and could be an early indicator of a trend which we intend to monitor.
