Americans Increasing Credit Access; Keeping Balances, Delinquencies in Check

Americans opened new credit cardrnaccounts at an increased rate during the second quarter of 2012.  The balances on those cards however remained nearrnhistoric lows as did delinquency rates on credit card debt. </p

TransUnion reported this morning thatrnthe national credit card delinquency rate which is the ratio of borrowers whornare 90 days past due, dropped to 0.63 percent, down 10 basis points from thernfirst quarter rate.  The rate has been lowerrnon only two occasions; in Q2 2011 it hit its lowest level of 0.60 percent andrnin the fourth quarter of 1994 the rate was 0.61 percent.</p

New cards were originated at a 4rnpercent higher rate than in the second quarter of 2011 while the share of cardsrnto new non-prime higher-risk customers (those with a VantageScore® under 700 onrna scale of 501-990) fell slightly from 27 percent of originations a year ago torn26.1 percent, still much higher than the 20.6% noted in the second quarter of 2010. </p

With the availability of new credit, thernaverage credit card debt increased over the past year from $4,699 in the secondrnquarter of 2011 to $4,971 in the most recent period, but this is low byrnhistoric standards.  In the secondrnquarter of 2009 the average credit card debt was $5,719.</p

“The national credit cardrndelinquency rate continues to remain at the lowest levels we’ve observed in 18rnyears,” said Ezra Becker, vice president of research and consulting inrnTransUnion’s financial services business unit. “It’s a positive situationrnbecause average borrower balances have increased over the past year as new cardrnoriginations have grown. These low delinquency rates reflect both continuedrnconservatism in lender underwriting and the ongoing prioritization of cardrnpayments among consumers.”</p

“While non-prime borrowers madernup a slightly smaller percentage of all new trades in this latest quarter, theyrncontinue to gain more access to credit. In conjunction with the growth in thernoverall number of card originations in the last few years, it means that therncredit card pie is bigger, and non-prime consumers are getting a bigger slicernof that pie,” said Becker. “This is important to note, becausernone would think delinquencies would rise as non-prime borrowers gain more accessrnto credit. We’ve found that consumers continue to value their credit cards morernthan ever and will likely do so at least until unemployment abates.”</p

On a state level the delinquencyrnrate rose in five states with the highest increases in Massachusetts (+39.22rnpercent), Mississippi (+29.33 percent) which also had the highest delinquencyrnrate at 0.97 percent, and West Virginia (+28.13 percent).  Other states with high rates were Nevada and Alabamarnat 0.89 and 0.84 percent respectively.  The lowest delinquency rates were in thernneighboring states of North and South Dakota and Montana where the rates rangedrnfrom 36 to 43 percent.</p

Based on current economic assumptions,rnTransUnion is maintaining previous forecasts for credit card delinquencies tornremain near current levels, with potentially some seasonal fluctuations,rnthrough the end of 2012. This forecast is based on seasonality effects andrnvarious other economic factors such as anticipated gross state product,rnconsumer sentiment, disposable income, and employment conditions.

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