MINNEAPOLIS — In FICO’s quarterly survey of bank risk professionals, lenders said they are expecting an increase in the availability of car loans for consumers with damaged credit. The survey, conducted for FICO by the Professional Risk Managers’ International Association (PRMIA), also found that survey respondents expected delinquency rates on most types of consumer loans to remain flat or decline, indicating that consumers are regaining their credit health. The sole exception to this outlook was student loans, with most respondents expecting delinquencies to increase.
Auto financing expected to get easier
When asked about lending to borrowers with damaged credit — often referred to as subprime borrowers — more than 50 percent of respondents expected the auto sector to see the largest increase in 2012, while 38 percent expected the largest increase to be in credit cards, and 12 percent expected the largest increase to be in residential mortgages. When asked about overall subprime lending activity, 44 percent of respondents felt that such lending in 2012 would remain flat compared to 2011.
“We are clearly seeing a loosening of credit in the auto finance market, with lenders responding to increased consumer demand,” said Dr. Andrew Jennings, chief analytics officer at FICO and head of FICO Labs. “This is good news for car dealers and it should help the auto sector continue its recovery. However, underwriting for other types of consumer lending, particularly mortgages, is still tight. Lenders aren’t yet ready to increase their exposure for the sake of growing their mortgage portfolios.”
State of consumer credit health: stable
When asked about their expectations over the next six months, the majority of respondents expected delinquency rates to remain flat or decrease for credit cards (69%), car loans (77%), mortgages (73%) and small business loans (72%). However, a majority of respondents (64%) expected delinquencies on student loans to increase. This is the third consecutive quarter that respondents have predicted an increase in student loan delinquencies.
“I see these results as quite positive, save for student lending,” said Jennings. “Last quarter we saw a sharp uptick in sentiment regarding consumer credit, with more respondents expecting things to improve than we had seen at any point in the previous two years. Now lenders are expecting things to at least stay the same, and quite possibly improve further. These results indicate that bankers believe consumer health has turned a corner.”
A detailed report of FICO’s quarterly survey results is available at http://www.prmia.org/PRMIA-News/FICO-USConsumerCreditJuly2012.pdf. The survey included responses from 192 risk managers at banks throughout the U.S. in June 2012. FICO and PRMIA extend a special thanks to Columbia Business School’s Center for Decision Sciences for its assistance in analyzing the survey results.
The Professional Risk Managers’ International Association (PRMIA) is a higher standard for risk professionals, with 65 chapters and more than 80,000 members worldwide. A non-profit, member-led association, PRMIA is dedicated to defining and implementing the best practices of risk management through education, including the Professional Risk Manager (PRM) designation and Associate PRM certificate; webinar, online, classroom and in-house training; events; networking; and online resources. More information can be found at www.PRMIA.org.
FICO (NYSE:FICO) delivers superior predictive analytics solutions that drive smarter decisions. The company’s groundbreaking use of mathematics to predict consumer behavior has transformed entire industries and revolutionized the way risk is managed and products are marketed. FICO’s innovative solutions include the FICO® Score — the standard measure of consumer credit risk in the United States — along with industry-leading solutions for managing credit accounts, identifying and minimizing the impact of fraud, and customizing consumer offers with pinpoint accuracy. Most of the world’s top banks, as well as leading insurers, retailers, pharmaceutical companies and government agencies, rely on FICO solutions to accelerate growth, control risk, boost profits and meet regulatory and competitive demands. FICO also helps millions of individuals manage their personal credit health through www.myFICO.com. FICO: Make every decision count™.
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Except for historical information contained herein, the statements contained in this news release that relate to FICO or its business are forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including the success of the Company’s Decision Management strategy and reengineering plan, the maintenance of its existing relationships and ability to create new relationships with customers and key alliance partners, its ability to continue to develop new and enhanced products and services, its ability to recruit and retain key technical and managerial personnel, competition, regulatory changes applicable to the use of consumer credit and other data, the failure to realize the anticipated benefits of any acquisitions, continuing material adverse developments in global economic conditions, and other risks described from time to time in FICO’s SEC reports, including its Annual Report on Form 10-K for the year ended September 30, 2011 and its last quarterly report on Form 10-Q for the period ended March 31, 2012. If any of these risks or uncertainties materializes, FICO’s results could differ materially from its expectations. FICO disclaims any intent or obligation to update these forward-looking statements.
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