Originations are virtually nonexistent for borrowers with credit scores below 620. Whether this pattern stems from tight supply or from weak demand among borrowers with lower credit scores, it has disturbing implications for potential new households.
Younger individuals – who have seen the greatest drop in household formation – have, on average, credit scores that are more than 50 points lower than those of older individuals, a difference that existed even before the recession. Staff analysis comparing first-time homebuying in recent years with historical levels underscores the contraction in credit supply.