Hear me out. Listen .
A FICO score above 720 indicates a consumer with a healthy personal financial picture. IOW, a low risk to default.
New York Fed data just came out and approximately 3.5% of outstanding debt is in some stage of delinquency. If you don’t track these numbers 3.5% is very low delinquency, look at the chart to see the trends. The delinquency rate was 5% right before Covid in 2020.
Then look at the FICO score in the second chart below. Almost 80% of borrowers have an average score above 720!
A score of 620 is, with rare exceptions like VA and FHA loans, the worst acceptable score for a home loan. Look at the chart at 2003 thru 2008 and see the red, Lots of loans given to people with a Fico of 620 or lower. The credit crash was inevitable.
But look at how the red ( 620 and under Ficos) is barely visible since 2020.
Stay with me on the second chart, look at the blue bars ( Fico 760 and above) you see how consumers credit scores spiked up around 2020-2021?
Q: What happened in 2020 that started the spike in credit scores?
A: 2% mortgage rates.
We gave everyone cheap long term debt while wages and investment income spiked up. For those of us that watch these trends, this is porn. Chart porn. I have watched these charts closely for 30 years. It still puzzles me when folks say Americans are hurting. Surely some are, but many are doing very well.
Homeowners are doing "well" Ballss, and they know that if they miss a payment they are out on the streets. People are finally wising up and realizing that you get more pussy with a roof over your head than living out of your BMW. Also, the game changed and only those with good credit to begin with were given these low rates, so it is more of people making cuts to the wants, and living a bit more within their means.