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Who Should be Cheering for Falling FICO Scores?

One third—33% of closed loans—had an average FICO score of less than 700 compared to 24% one year ago, yet another sign that lending standard are easing.  Or are they?

According to Ellie Mae’s latest monthly origination report, great progress is being made in reducing the average FICO score to give more average American families a shot at a mortgage, especially first time buyers.

But a closer examination of the February report reveals that FICO levels are falling fastest among refinancing borrowers—families that already own a home and in most cases are not refinancing to buy another home but to lower their mortgage rates, cash equity of our their home or remodel.   First time buyers, it turns out, aren’t much better today than they were a year ago.

Check out how average FICO scores have changed—or not changed—for different borrowers over the past 12 months.


Ellie Mae FICO Data for Closed Loans


Borrower/Loan type

Average FICO 2/13

Average FICO 2/14


All loans




FHA Refi




FHA Purchase




Conventional Refi




Conventional Purchase





So though it is true that for borrowers seeking a mortgage FICO scores have dropped over twenty points, the lion’s share of the decline is benefitting home owners who are refinancing rather than home buyers who are purchasing a home.  For home buyers, especially first time buyers who are having the greatest difficulty getting financing today yet are so critical to the housing economy, FICO scores have fallen one third as much or less than refis.

The difference is most obvious among FHA borrowers.  FICO scores for FHA purchase loans have fallen only 13 points over the past 12 months, yet FHA loans are extraordinarily popular among first time buyers, who make up a third or more of all FHA borrowers.  Refinancing FHA borrowers, who already own homes, enjoyed a 43 percent decline.





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