The average credit score of borrowers (those who borrowed money) who took out household secured loans and jeonse loans from major domestic banks has risen to around 940 points. This is an increase of more than 10 points compared to a year ago. It is analyzed that banks have raised the credit score cutoff in line with the financial authorities' strengthening of household debt management policies, and that "credit inflation" has also had an impact. There are concerns that low- and medium-credit borrowers, faced with higher loan thresholds, may be pushed beyond the second financial sector.
According to the Korea Federation of Banks on the 14th, the average credit score of borrowers who received regular repayment housing loans from the five major banks, including KB Kookmin, Shinhan, Hana, Woori, and NH NongHyup, was recorded at 940 points (based on credit evaluation agency KCB) in January this year. A month earlier, in December of last year, the average credit score had risen to 947 points. Based on the credit grades (1-10), which were eliminated in 2021, a score of 942 points or higher corresponds to the top grade, indicating that the majority of new borrowers from banks are high credit scorers in the highest category.
The average credit score has sharply increased over the past two years. The average credit score for housing loans from the five major banks rose from 909 points in December 2022 to 930 points in December 2023, before jumping to the 940s. Over the two years, the average credit score increased by 38 points. The same applies to jeonse loans. The average credit score for jeonse loans from the five major banks rose by 17 points from 920 points in December 2023 to 937 points in December 2024. In 2022, there was no public disclosure of jeonse loans. The average score for personal credit loans also increased by more than 20 points during the same period, rising from 903 points to 923 points to 925 points.
Internet-only banks, established to expand lending to low- and medium-credit borrowers, have had even higher thresholds than commercial banks. As of the end of January, the average credit score for housing loans handled by internet banks Kakao and Kbank was 968 points. The average credit score for jeonse loans from the three banks, including Toss Bank, was 942 points, which is about 20 points higher than that of commercial banks.
As banks raised lending rates and restricted new loans to manage the total amount of household loans, it is analyzed that borrowers with relatively higher credit ratings took out loans first, resulting in the average score rising. The launch of successive "credit score management services" has also made it easier to manage credit compared to the past. Fintech companies such as Toss are providing services that allow borrowers to easily increase their credit scores by submitting documentation of utility payments and communication expenses to credit evaluation agencies on their behalf. In addition, they provide personalized credit score management plans based on loan and card usage history.
According to KCB, as of the end of 2023, there were 13,146,532 super high credit scorers with scores of over 950 points, accounting for about 26% of the total individuals (49,533,733). The number of super high credit scorers has rapidly increased from 9,066,974 at the end of 2019 to over 10 million in 2021. There are 21,493,046 borrowers with scores above 900 points, which is nearly half.
If the discriminative power of credit scores decreases due to this credit inflation, there may be a problem of decreased lending supply to low- and medium-credit borrowers. If those with high credit scores become the majority and funding concentrates on high-credit individuals, borrowers in the low 900s will inevitably be pushed toward the second financial sector and lending industries.
To prevent this concentration phenomenon, banks are gradually introducing alternative credit evaluation systems. This involves utilizing non-financial information, such as shopping usage history and payment history for communication fees, in credit evaluations. Shinhan Bank and NongHyup Bank are considering applying the "Naver Pay Score" for loan assessments. The Naver Pay Score is a personal credit evaluation model developed jointly by Naver Pay and NICE Information Service, characterized by its use of non-financial information.