Consumers improving their credit management, bureaus report

May 21, 2015

NEW YORK (5/21/15)--Three of the nation’s leading credit bureaus released delinquency data this week, and on the whole it appears consumers are getting a solid handle on their credit.

Experian reported that its composite index, which tracks a broad spectrum of consumer credit defaults, slipped to a historical low of 0.97% in April, an 8-basis-point decrease and the lowest number since July 2014.

Within the composite index, second-mortgage defaults also recorded historical lows, while auto-loan defaults posted a second straight monthly drop and first-mortgage defaults slimmed for the third consecutive month.

“We’re seeing borrowers become increasingly better at making on-time payments, but we’re also seeing a faster rate of amortization due to low interest rates,” said Amy Crews Cutts, Equifax chief economist. “Because a larger portion of each payment is going to principal, consumers are now paying off their mortgage debts faster than they would have a few years ago.”

Equifax reported that severe delinquency rates on mortgages fell across the board in the first quarter, with the rate for first mortgages dropping to 2.35% from 3.27%, the rate for home-equity installment loans slipping to 1.98% from 2.59%, and the rate for home-equity revolving lines of credit narrowing to 1.47% from 1.71%. 

That, all despite an uptick in subprime lending.

On a year-over-year basis, home-equity lines of credit accounts jumped 36% in the first quarter for those with credit scores 620 or below.

TransUnion reported similar trends.

The delinquency rate on credit cards was unchanged on an annual basis in the first quarter, at 1.37%, while the average balance per borrower fell to $5,142 from $5,168 over that stretch, according to the credit bureau.

TransUnion also found that the number of credit card accounts climbed year-over-year in the first quarter, with the subprime market representing a larger piece of all new credit card originations.

“As the number of credit card accounts continues to rise, we’re seeing the non-prime population take a larger share of new credit card originations--showing an increase of 5.1 points since last year,” said Nidhi Verma, director of research and consulting for TransUnion’s financial services business unit.