As half of the population now holds credit scores above 900, the ability of credit bureaus to differentiate risk is rapidly diminishing. With an increasing number of high scorers, the traditional notion that higher credit scores lead to better loan conditions is being challenged.
According to the financial sector, as of the end of last year, 22.83 million people, or 45.1% of the population, had credit scores above 900 according to Korea Credit Bureau (KCB). NICE Credit Rating reported that 23.8 million people, or 47.9%, fell into this category.
This trend of rising credit scores is also reflected in the criteria for policy-based financial support. Recently launched mid-interest living stability loans target individuals in the bottom 50% of credit scores, with cutoff points as of the end of last month at 889 for NICE and 875 for KCB. Those scoring in the high 800s are classified as 'low to medium credit' borrowers.
Moreover, even high scorers above 900 are facing restrictions on bank loans, leading to a 'balloon effect' where they are pushed towards secondary financial institutions. The threshold for bank loans has risen, creating a structure where even previously high scorers are being sidelined. As of the end of May, the average credit score of household loan users at the five major banks (KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup) reached 943.
With the increasing proportion of high scorers, financial institutions are finding it increasingly difficult to assess borrower risk based solely on credit bureau scores. Consequently, credit scores are now being used as a minimum criterion for loan eligibility, while actual loan limits, interest rates, and approvals are increasingly determined by proprietary credit assessment models (CSS). There is a growing need to evaluate repayment ability and transaction history more meticulously, even among those within the same 900-point range.
The benefits of lower interest rates based on credit scores are also less pronounced than before. An analysis of data from the Korea Federation of Savings Banks revealed that among 30 savings banks that disclosed interest rates for household credit loans exceeding 300 million won, 20% (6 banks) reported that the average interest rate for borrowers with scores above 900 was actually higher than that for those in the 800s.
While credit scores have been rising, individuals with limited financial histories, such as recent graduates, freelancers, and small business owners—referred to as 'thin filers'—remain underserved by the existing evaluation system.
Currently, credit evaluations by credit bureaus are based on past financial transactions and repayment records. As a result, those without stable income or financial history, even if they have growth potential, are likely to receive low credit scores. According to the Financial Services Commission, the average credit score for thin filers is around 710 as of the end of 2024.
A financial sector official stated, "In the past, a credit score above 850 was considered sufficiently high for evaluation by banks, but now a score of 900 has become common. As the standard for credit scores rises, financial institutions are refining their own CSS to better assess risk."
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.