Tag Archive | "credit scores"

Consumer Complaints Hit 677,000, CFPB Reports

WASHINGTON, D.C. — The Consumer Financial Protection Bureau (CFPB) released a report Tuesday highlighting trends in consumer complaints through August 1, with credit reporting complaints seeing the sharpest increase compared to both the prior month and prior year.

The bureau has handled approximately 105,000 credit reporting complaints since it began accepting them in October 2012. Those complaints jumped 56% between June 2015 (4,289 complaints) and July 2015 (6,969 complaints). In analyzing the period of May through July 2015, complaints increased by 45% compared to the prior year.

Of those complaints,77% involved incorrect information on reports. Consumers frequently complained of debts already paid or debts not yet due showing up on their report, negatively affecting their credit scores. The CFPB said that consumers also had trouble accessing their reports as a result of rigorous online identity authentication questions.

The three companies that received the highest volumes of credit reporting complaints were Equifax, Experian and Transunion, which accounted for 97% of credit reporting complaints.

Overall, the bureau has handled 677,200 complaints nationally. In July, the most complained about financial product or service was debt collection, representing about 31% of complaints submitted. The second most-complained-about consumer product was credit reporting, accounting for approximately 6,696 complaints. The third most-complained-about financial product or service was mortgages, accounting for approximately 4,498 complaints. The CFPB did not list auto loans amount the 11 credit products that triggered complaints.

The bureau reported that in a year-to-year comparison, consumer loan complaints, which include pawn loans, title loans, and installment loans, showed the greatest percentage increase (61%) from the same time last year. They went from approximately 718 complaints to 1,154 complaints on average per month over a three-month time period. Bank account or services complaints showed the greatest percentage decrease over the same time period, going from a monthly average of 1,976 complaints in 2014 to 1,895 complaints in 2015 — a 4% decrease.

Hawaii, Maine, Georgia, and North Carolina experienced the greatest complaint volume increases from the same time last year, with Hawaii up 37%, Maine up 36%, and both Georgia and North Carolina up by 33%. South Dakota, New Mexico, and Alaska experienced the greatest complaint volume decrease from the same time last year, with South Dakota down 31%, New Mexico down 16%, and Arkansas down 11%.

“Whether a consumer is trying to get a mortgage, apply for a student loan, or buy a car, credit reports are fundamentally important in allowing people to access their financial goals,” said CFPB Director Richard Cordray in a press release. “As we see a rise in the number of consumers complaining about this issue, the Bureau will continue to work to ensure that credit reports are fair, accurate, and readily available to all consumers.”

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Good Renters Deserve Better Credit Scores

For many consumers, a confusing part of trying to get a loan is the way that credit begets credit, reported BoombergBusinessweek. Banks want to lend to people who’ve proven to be a good risk. Without a track record, getting a loan can be hard or expensive. A new report from the credit bureau Experian shows that many borrowers could benefit if lenders took rental payments into account.

As lenders bounce back from the Great Recession, they’ve been looking at a broader range of non-traditional data to identify more potential-borrowers who could be a good risk. The idea is some people who don’t have regular credit histories but pay their rent, utilities, and other recurring expenses on-time could a good credit risk. In 2010, Experian bought RentBureau, which tracks apartment rents from large property managers. Using that new data, Experian published an analysis [PDF] that focuses on almost 20,000 people in government-subsidized housing who pay their monthly rent on-time. (Renters who missed payments were already reported to credit bureaus through collections agencies.)

Before adding in rental history, 11 percent of the sample had no credit file at all, which makes it extremely hard to get loans. Once the rental history was added in, 59 percent of that group had prime credit scores, and another 38 percent had “nonprime” scores. Just 3 percent were considered “subprime.”

For the rest of the sample, those who already had a credit score, about two-thirds were considered subprime borrowers to start. When taking rental history into account, 21 percent didn’t see their scores change, and 5 percent saw their scores decrease. The largest group of people—about 74 percent—saw their scores increase. Overall, the credit scores went up an average of 29 points. (Like a FICO score, Experian’s VantageScore is on a scale from 300 to 850.) The report estimates that the credit card interest rates for a borrower who jumped from the “subprime” to “nonprime” would be 4.2 percentage points lower.

While adding new types of data like rent to credit scores means consumers must be vigilant in ensuring a growing number of companies are reporting the data accurately, the Experian’s study makes a compelling case that adding rental history could help people who most need a leg-up.

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Car Lenders Ease Credit Standards and Terms to Spur Loans

Lenders in the United States gave car buyers some of the easiest credit terms since the financial crisis in the first quarter as they competed to make more loans to borrowers they see as safe, a credit research company said on Tuesday.

The lenders also provided more money to people with subprime credit scores, cut interest rates and granted more time to repay, Experian Automotive, a unit of Experian Plc, said in a report. Rates of late payments and repossessions by lenders also declined in the quarter, Experian said.

The relaxed terms make it easier for individuals to buy cars, which is good for car dealers, manufacturers and the economy, reported Reuters. But more aggressive lending also increases the chances of another round of losses for banks if borrowers lose their jobs and cannot keep up their car payments.

“This thawing of the credit pipeline has been good for everyone, from consumers to lenders to automotive retailers,” said Melinda Zabritiski, director of automotive credit for Experian.

Lenders are competing more to make car loans as banks struggle with weak demand for credit from consumers and many businesses in the aftermath of the crisis.

Car loans proved to be safer than mortgage and credit card loans during the recession. Borrowers tend to make payments on cars a top priority because they need the vehicles to get to work or apply for jobs, studies have found.

Experian said the portion of new car loans going to subprime borrowers increased by 11.4 percent in the quarter from a year earlier.

The average credit score for borrowers buying new cars dropped six points to 760 on Experian’s scale, which classifies marks of less than 680 as subprime. For used-car buyers, the average score dropped four points deeper into subprime range to 659.

Loans were also bigger, with the average amount financed rising $589 to $25,995 for new cars and increasing $411 to $17,050 for used cars.

But average monthly payments increased by $3 or less for new and used cars as borrowers were given more time to repay and were charged lower interest rates.

The average time to repay loans increased by one month from a year earlier to 64 months for new cars and to 59 months for used cars. More than 9 percent of used-car loans were made for more than six years.

Interest rates fell, on average, by 0.27 percentage points to 4.56 percent for new cars and by 0.06 points to 9.02 percent for used cars.

The report also showed that Ally Financial Inc., the former General Motors Co mortgage and auto lender now 74 percent-owned by the U.S. government, has continued to push deeper into used-car lending compared with its competitors.

Ally’s share of used car financing by the biggest 20 lenders increased 8.3 percent from a year earlier to 4.2 percent of the market, while its portion of new-car financing fell by 39.7 percent to one-tenth of the market, still the largest market share of any company.

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NADA University Announces Legal, Regulatory Webinars

McLEAN – NADA University announced it is now offering all of its legal and regulatory webinars – live and on-demand – at no cost to NADA and American Truck Dealer (ATD) members and their staffs.

Dealer members may extend this benefit to their contracted financial and legal professionals by adding those professionals as licensed users within their NADA University account.

“Dealers face an enormous challenge in staying updated and compliant on complex legal and regulatory requirements, so NADA U has responded by expanding access to critical information that will make that job a lot easier,” said Michelle Primm, managing partner of Cascade Auto Group and chair of NADA’s Dealership Operations Committee.

NADA U’s legal and regulatory webinars focus on a variety of topics, including the following:

  • Credit score disclosure requirements
  • The Family and Medical Leave Act
  • The Federal Trade Commission’s (FTC) new model privacy notice
  • FTC Red Flags Rule
  • The new Small Business Administration dealer floorplan loan program
  • Organized labor issues and response
  • Wage and hour compliance
  • Risk-based pricing rule
  • UNICAP safe harbor methods
  • Comprehensive Safety Analysis program

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Interest Rates at Lowest Levels Since 2008, Experian Reports

SCHAUMBURG — Experian Automotive announced that the automotive loan market showed continued improvement, with interest rates for new- and used-vehicle loans reaching the lowest levels since 2008, according to its quarterly automotive credit analysis.

In the fourth quarter 2011, average credit scores for new- and used-vehicle loans dropped, the percentage of loans to customers with nonprime, subprime or deep subprime credit scores increased, and lenders increased their willingness to make loans between six and seven years long, according to Experian.

“The improved automotive lending market is good news for consumers in the market to buy a vehicle,” said Melinda Zabritski, director of automotive lending at Experian Automotive. “The confluence of low interest rates, longer loan terms and an increase in loans outside of prime provide a great opportunity for more people to find a vehicle that suits their needs.”

Consumers continued to do a better job of repaying loans in the end-of-year quarter as loan delinquencies fell. The 30-day delinquency rate fell 6.57 percent from the year-ago quarter to 2.79 percent. The 60-day delinquency rate also fell by 9.51 percent from 0.79 percent in the fourth quarter 2010 to 0.72 percent in the last quarter of 2011.

Another positive sign for the lending market is that the overall dollar volume of loans at risk dropped to $18.5 billion, a $1.862 billion drop from the fourth quarter 2010. Meanwhile, the total volume of open loans rose by $23.9 billion in the fourth quarter last year to $658 billion.

“Lenders are clearly on much more solid ground than they were two or three years ago,” Zabritski said. “With delinquencies and total dollar volume at risk down, lenders have been able to adopt more aggressive strategies. This tends to benefit everyone, from lenders to automotive retailers to the end consumer. With more lenders aggressively competing for business, it’s a great time for consumers to buy or finance a vehicle.”

Average interest rates for new-vehicle loans fell to 4.52 percent from the year-ago quarter. Average interest rates for used vehicle loans fell also to 8.68 percent from 8.71 percent in the fourth quarter 2010.

Average credit scores for new-vehicle loans dropped six points to 761, while average credit scores for used-vehicle loans dropped nine points to 670. New-vehicle loans to nonprime, subprime and deep subprime customers increased by 13.8 percent from a year ago.

Loans of 73 to 84 months accounted for 14.1 percent of all new-vehicle loans and 9.04 percent of all used-vehicle loans, up 47.1 percent and 41.1 percent from the fourth quarter 2010, respectively.

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Auto Industry Migrating To FICO 8 Auto Score

FICO announced that the auto industry is simultaneously migrating to the FICO 8 Auto Score, with most lenders expected to complete the adoption process by May.

A number of auto lenders have already migrated to the FICO 8 Auto Score, including Volkswagen Credit, Santander Consumer USA and First Investors, with a majority of the top 35 lenders planning to migrate within the next two months, according to FICO.

In addition, the nearly 18,000 franchised dealers and the majority of the more than 30,000 independent dealers using credit scores in the industry are also expected to migrate to remain in synchronization with their lender partners, reported F&I and Showroom.

The industry-wide migration to the new FICO 8 Auto Score will allow lenders and dealers to jointly share more consistent information as they finance vehicle sales and extend credit to their customers with greater confidence. Rating agencies and the general financial services community also use FICO Scores for their analyses of the auto industry.

“FICO seeks to help lenders position themselves for growth while controlling risk in their portfolios,” said Dr. Mark Greene, CEO of FICO. “Moreover, FICO knows well that the credit quality of the automotive consumer has changed over the last couple years. While there is cautious optimism around growth opportunities for the auto market in 2011, FICO realizes that sharper risk prediction tools are critical to our clients’ long-term profitable growth.”

The FICO 8 Auto Score is currently being used by more than 3,500 banks and finance institutions across multiple lending lines such as bankcard and mortgage.

“To minimize risk and increase profits, lenders need updated credit scores that incorporate the latest data and analytics for credit risk assessment,” said Craig Focardi, senior research director at TowerGroup. “Updated credit scoring analytics enable lenders to upgrade their loan underwriting and account management practices, which has a direct impact on the bottom line.”

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