Average credit score at 3 internet banks climbs to 915 as loan rates dip

The average interest rate on new unsecured credit loans at South Korea's three internet-only banks fell last month as more high-credit borrowers took out loans, even as rates for low-credit borrowers climbed toward 8 percent annually.

The average credit score for new general unsecured loans issued in May by Kakao Bank, K bank and Toss Bank stood at 915, up 16 points from 899 in April, according to the Korea Federation of Banks' consumer portal Monday.

The average credit score at the three internet banks edged down from 903 in January to 902 in February before rebounding to 905 in March. It then fell 6 points to 899 in April before jumping sharply to 915 in May.

By bank, Kakao Bank's average credit score surged 39 points in a single month to 917, while Toss Bank's rose 10 points to 930. K bank edged down from 899 to 897.

The rise in average credit scores pulled the overall loan rate lower. The three internet banks' average interest rate on general unsecured loans fell 0.11 percentage points to 5.58 percent annually from 5.69 percent the previous month. "Demand for loans from high-credit customers with relatively high credit scores increased last month, which appears to have pushed the average credit score above the prior month's level," a Kakao Bank official said.

Rates for low-credit borrowers, however, moved in the opposite direction. The average rate for borrowers with credit scores of 600 or below rose 0.29 percentage points to 7.89 percent annually from 7.60 percent the previous month.

Breaking down the figures by bank, Kakao Bank's average rate for borrowers with scores of 600 or below rose 0.41 percentage points from 8.71 percent in April to 9.12 percent in May. Toss Bank's rate for the same group rose 0.43 percentage points to 8.40 percent, while K bank's edged up 0.02 percentage points to 6.15 percent. This contrasts with the five major commercial banks — KB Kookmin, Shinhan, Hana, Woori and NH NongHyup — where the average rate for borrowers with scores of 600 or below fell 0.14 percentage points from 8.07 percent to 7.86 percent over the same period.

Some analysts caution, however, that the published rates can create a misleading picture. The sub-600 category includes not only loan products aimed at low-income borrowers but also debt-restructuring refinance loans and business-closure support loans, meaning the monthly average can swing sharply depending on which products were most heavily issued in a given month.

"The figures may reflect a temporary fluctuation based on monthly lending activity, and it would be a stretch to read them as a meaningful shift in credit scores," a K bank official said.

A Toss Bank official echoed that view, noting that the rates published by the Korea Federation of Banks represent averages across newly executed loans rather than a uniform rate applied to individual borrowers. "Particularly in the sub-600 range, the number of loans handled each month is so small that a change in the terms of just a few borrowers can move the average significantly," the official said.