This graph shows the evolution of credit scores over time. It's a great way of seeing how credit characteristics change over time. These characteristics can be a major contributor to a person's credit score. The article also discusses how credit can affect credit scores and the effects of high-cost debt.
Time series evolution credit scores
In many credit decisioning models, time series data is an important component. This data is used by lenders to determine the risk of a customer's credit history. It tracks how a consumer pays bills over time. Lenders can gain a greater understanding of borrowers' late payments history by looking at time series data on their credit card balances.
This data is generally good, but it can also show a downward tendency. This is particularly true of consumers from lower risk and lower-scoring segments. Recent declines of hard credit inquiries may be due in part to consumer's renewed focus on reducing debt and spending.
Dropping credit characteristics in groups that are closely related has an impact
One study looked at how removing a set of credit characteristics could affect a credit score. Dropping this group of credit characteristics raised the mean credit score by 2.5 points, or about one-fifth of a point. People with lower credit scores had greater changes than those with higher credit scores.
The average black credit score did not change if one characteristic was removed from it. The average change in black credit scores was 0.1 points. These characteristics are highly correlated in the scoring model, which explains the small change. These differences are consistent across all three scorecards.
Other characteristics may have an adverse effect on your ability to perform.
Traditional credit score analysis has focused on the effects of one characteristic such as age. Although it is not known how adding additional characteristics to a model can affect its effectiveness, it may be significant. To determine the effects of adding another characteristic to the model, each scorecard model was re-estimated and compared with the FRB base model.
The mean score was not affected by the addition of ethnicity or race, but it would have an impact on the predictive power. However, dropping these attributes would result in a significant decrease in model predictiveness for other people.
High-cost credit has negative effects
High-cost debt can have a negative impact on credit scores for a number of reasons. High-cost debt signals to lenders that a borrower has poor credit ratings. High-cost borrowing leads to higher defaults. This can have a negative impact on your overall financial situation. High-cost credit can have a negative impact on the borrower's social standing.
High-cost financing can decrease the demand for standard sources and may limit future access to these sources. A second reason is that high-cost borrowers may choose to take out high-cost financing, which can be more risky. While this may alleviate short-term financial concerns, it reduces the availability standard sources for financing.