Credit Dynamics

Another dimension of Community Credit is measuring change over time. We use credit dynamics or growth in the subprime segment of a community, as such an indicator.

The subprime segment may grow or shrink or remain unchanged because of credit score upgrades/ downgrades; people moving in or out of a community; or people who are new entrants or exits from the credit economy. Since the sources of change have different policy and intervention implications, we decompose the subprime 4-quarter growth rate into three mutually exclusive sources:

• Net percent downgrades (Stayers) - people who stayed in the geography and their credit scores fell below 660 minus the upgrades.
• Net percent geographic movers (Relocators) - subprime residents who moved into the geography minus those who moved away.
• Net percent new entrants to the credit economy (New Entrants) - people who entered the credit economy with a subprime credit score minus those who exited.