Equifax Releases its Latest Economic Trends Commentary Around Subprime Auto Loans
On February 18, 2015, Equifax released its latest Economic Trends Commentary, “Subprime Auto Loans: A Second Chance at Economic Opportunity,” which examines two groups of consumers with deep subprime credit scores (Equifax Risk ScoreSM below 550) over a three-year period: those who originated a subprime auto loan and those who did not.
Equifax found that over the three-year time period, those consumers with deep subprime credit scores that originated a subprime auto loan showed, in aggregate, a significant increase in their credit score. Even more telling, those that took out a subprime auto loan were four times more likely than those who did not to have improved their score to a level above 640, moving them out of the subprime segment.
Chief Economist Amy Crews Cutts and Deputy Chief Economist Dennis Carlson commented on the data saying, “The auto industry’s success wouldn’t be what it is today if it weren’t for the responsible, solid subprime loans made to the many Americans in need of a car to get to their jobs or take their children to school. Lenders now have better tools, more data and enhanced technology available to them to make sounder and safer decisions. While we should all continue to remain vigilant, we can confidently say that subprime auto lending is currently performing well, it’s not growing as quickly as prime lending, and our data does not suggest that a bubble is forming.”
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