Mortgage delinquency rates rise for US consumers beyond a certain age, according to a recent report from analytic software firm FICO [1]. Scott Shulz, FICO data scientist, points out that while older people have higher credit scores in general than young people, both mortgage and auto delinquencies are rising for many older Americans.
FICO's chart shows the serious delinquency rate by age over the prior two years for various credit products and the report notes that the analysis is limited to consumers with activity during the period. For 90+ delinquency rates for mortgages and other closed-end loans, the lowest points are reached for consumers in their late 60s or early 70s, before rising again. Conversely, the report says that delinquency rates for revolving trade lines (which include credit cards) decrease throughout consumers' lives.
"For most loan types, delinquencies peak when consumers are in their 20s and starting to take loans," said Schulz. "Mortgage delinquencies have a flatter curve and peak later, at age 44. Delinquency rates rise for auto loans and mortgages held by people in their late 60s, but only for mortgages do they get near their earlier peak."
Despite the fact that their delinquency rates are reported to increase, older Americans only represent a relatively small portion of the total debt tracked by the bureaus. For example, consumers aged 67 or older represent 20 percent of the bureau population, but they have only 11 percent of the total debt on the bureau, and only 11 percent of mortgage balances.
A report from MBA suggests that these increases were due, in large part, to failing memories in older consumers.
"It may be that older people forget to pay their bills sometimes, but there are other possible reasons," Schulz said. "Much of the delinquency uptick is driven by a relatively small number of borrowers who still have sizeable mortgage and auto debts into their 70s and 80s. This suggests that some delinquencies may very well be due to a common occurrence in lending – those who have the resources pay off their loans over time, leaving only those more financially strapped consumers in the loan pool."