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TransUnion: Credit Card Delinquency Rates, Balances Rise in Third Quarter

 

Nov 20 - The national credit card delinquency rate (the ratio of borrowers 90 or more days past due) increased slightly to 0.75 percent in Q3 2012 from 0.71 percent in Q3 2011. This rate had been 0.63 percent in Q2 2012, a seasonal low.

Average credit card debt per borrower also increased on a yearly basis by 4.91 percent, rising to $4,996 in Q3 2012 from $4,762 in Q3 2011. On a quarterly basis, average credit card debt was up 0.50 percent relative to Q2.

This information is reported by TransUnion and is part of its ongoing series of quarterly analyses of credit-active U.S. consumers, evaluating how they are managing credit related to mortgages, credit cards and auto loans.

“Credit card delinquencies are following a pattern similar to what we observed in 2011, with declines in the first two quarters of the year followed by an increase in the third,” said Ezra Becker, vice president of research and consulting in TransUnion’s financial services business unit. “That seasonal consistency is encouraging. Credit card debt trends in 2012 also are mirroring 2011, with a decrease in the first quarter followed by two increases over the next six months. With both delinquencies and debt levels remaining quite low relative to historical norms, we are confident in the continued stability of credit card usage patterns in the short term.”

New credit card originations grew 3.14 percent in Q2 2012 relative to Q2 2011. The share of non-prime, higher-risk originations (with a VantageScore credit score lower than 700 on a scale of 501-990) was 29.55 percent in the second quarter of the year, slightly higher than one year ago (29.28 percent in Q2 2011), and much higher than the 23.86 percent observed in Q2 2010. Credit card originations are analyzed one quarter in arrears, to account for the reporting lag of new accounts.

“Non-prime borrowers continue to gain more access to credit. In conjunction with the growth in the overall number of card originations in the last few years, it means that the credit card pie is bigger, and non-prime consumers are getting a bigger slice of that pie,” said Becker. “It is possible that the slight increase in delinquencies year over year can be attributed in part to the increased share among non-prime borrowers of new accounts, but even so these delinquency numbers are not a cause for concern. We’ve found that consumers continue to value their credit cards more than ever, and will likely do so at least until unemployment further abates.”

Thirty-six states saw increases in their credit card delinquency rates year-over-year, while nine states and the District of Columbia saw decreases. No changes were observed in five states.  California and Nevada, two states hardest hit by the recession, continued to see decreases in their card delinquency rates.

On a more granular level, 64 percent of metropolitan statistical areas saw increases in their respective credit card delinquency rates in Q3 2012 relative to one year ago. This is only slightly higher than last quarter, when 62 percent of MSAs experienced a year-over-year increase.

Based on current economic assumptions, TransUnion forecasts credit card delinquencies to remain near present-day levels with potentially some seasonal fluctuations through the end of 2012. This forecast is based on seasonality effects and various other economic factors such as anticipated gross state product, consumer sentiment, disposable income, and employment conditions. The forecast changes as the economy deviates from a conservative economic forecast, if there are unanticipated shocks to the economy affecting recovery, or if lenders materially change their underwriting standards.


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