Stability in consumer credit scores: Level and direction of FICO score drift as a precursor to mortgage default and prepayment

Brent C Smith

Journal of Housing Economics, 2011, vol. 20, issue 4, 285-298

Abstract: This article represents an extension of the expansive credit risk and credit migration literature, prominent in the corporate bond and securities risk pricing literature, to an analysis of the drift of consumer credit scores. A rich data set of residential mortgages is used to observe credit score migration post loan origination and in a test of the ability of credit score transition to serve as a precursor to potential default and prepayment. The results indicate credit scores provide signals and information to investors and servicing agents in a fashion similar to credit ratings on commercial paper as to default potential.

Keywords: Residential mortgage default; Risk; Lending; Housing economics; Mortgage underwriting; Consumer credit (search for similar items in EconPapers)
JEL-codes: G21 R11 R20 R21 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1051137711000441
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jhouse:v:20:y:2011:i:4:p:285-298

DOI: 10.1016/j.jhe.2011.09.001

Access Statistics for this article

Journal of Housing Economics is currently edited by H. O. Pollakowski

More articles in Journal of Housing Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().