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.
“Just 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.
Credit 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.