Consumer credit scores may end up being a lousy predictor of U.S. borrowers’ ability to repay their car loans, according to UBS strategists, citing flaws in the scores similar to those that emerged during last decade’s housing bubble.
As many as one in five auto-loan borrowers admitted in a survey that their applications for debt contained inaccuracies, UBS strategists led by Matthew Mish wrote, meaning fraud could be more pervasive than lenders planned for. A growing number of borrowers have searched on the Internet for “credit score,” signaling that borrowers may be getting better at figuring out how to game their credit scores, the strategists said.
