Hey Kevin, this was a great listen. Thanks for sharing.
On the pod, you mentioned that the average credit score of a new mortgage borrower in the last 15 years has gone from 710 to 760. Separately, credit reporting firms also report that credit scores, in general, have gone up (680 to 710) over the same time and that US households are generally less levered.
Are we just seeing the overall increase in credit scores in that metric you mentioned rather than the impact of increase mortgage market regulation? Or is something else going on (credit score model updates, etc.)?
Thanks! I'm still working on brevity and clarity! But, glad to hear you liked it.
And, good question. I think there are a few things going on. The change I'm talking about happened abruptly, mostly over the course of 2008.
The general change in the average of all credit scores probably has 3 primary aspects:
1) Cyclical changes, which probably causes 10 points or a little more of variation between expansion and recession.
2) Demographics. Like many things, average credit scores are somewhat of a proxy for average age. Older families have better credit scores than younger families, so there has been an upward drift. Probably another 10 points or so of it.
3) Forcing families into non-debt decisions (becoming renters when mortgages are denied, for instance), has probably raised credit scores a bit by forcing families to trade debt-based financial stress for non-debt stress (paying more rent instead of a mortgage, for instance).
I haven't tried to model it, but all of these factors might mean that mortgage access has loosened somewhat since 2008 even if the median score on new mortgages has been flat. I think it would be a small partial reversal, at best. But, it might not be nothing.
Hey Kevin, this was a great listen. Thanks for sharing.
On the pod, you mentioned that the average credit score of a new mortgage borrower in the last 15 years has gone from 710 to 760. Separately, credit reporting firms also report that credit scores, in general, have gone up (680 to 710) over the same time and that US households are generally less levered.
Are we just seeing the overall increase in credit scores in that metric you mentioned rather than the impact of increase mortgage market regulation? Or is something else going on (credit score model updates, etc.)?
Thanks! I'm still working on brevity and clarity! But, glad to hear you liked it.
And, good question. I think there are a few things going on. The change I'm talking about happened abruptly, mostly over the course of 2008.
The general change in the average of all credit scores probably has 3 primary aspects:
1) Cyclical changes, which probably causes 10 points or a little more of variation between expansion and recession.
2) Demographics. Like many things, average credit scores are somewhat of a proxy for average age. Older families have better credit scores than younger families, so there has been an upward drift. Probably another 10 points or so of it.
3) Forcing families into non-debt decisions (becoming renters when mortgages are denied, for instance), has probably raised credit scores a bit by forcing families to trade debt-based financial stress for non-debt stress (paying more rent instead of a mortgage, for instance).
I haven't tried to model it, but all of these factors might mean that mortgage access has loosened somewhat since 2008 even if the median score on new mortgages has been flat. I think it would be a small partial reversal, at best. But, it might not be nothing.