How Inflated Credit Scores Are Leaving Investors in the Dark

The video discusses how economic growth has led to rising credit scores, but the inherent risk of consumers remains unchanged. Some lenders have not adjusted their underwriting to account for this, leading to potential risks, especially in subprime lending. Moody's highlights the issue of unaccounted risk, which could result in increased delinquencies and losses for investors. The video emphasizes the need for lenders to consider additional factors like debt-to-income ratios to better assess risk.

How have credit scores changed in relation to economic growth?

• They have decreased as the economy grows.

• They have remained the same despite economic growth.

• They have increased with the expanding economy.

• They have fluctuated unpredictably.

What is Moody's concern regarding subprime auto loans?

• They have no impact on the financial market.

• They are not affected by economic changes.

• They show increased delinquencies despite wage growth.

• They are too profitable for lenders.

What additional factors should lenders consider according to the discussion?

• Credit card limits

• Interest rates

• Debt-to-income ratios and LTV

• Loan duration

What could be a consequence of not adjusting FICO scores?

• Stable financial markets

• Increased delinquencies

• Decreased loan applications

• Increased investor confidence

What might happen to investors if credit scores are misleading?

• They could see increased returns.

• They will have no impact.

• They will gain more control over the market.

• They might face losses down the road.