Credit Card Delinquency Down Year-over-Year, But Up from Last Quarter

Both the credit card delinquency rate (the ratio of borrowers 90 days or more delinquent on their general purpose credit cards) and the average credit card debt per borrower dropped on a yearly basis during Q3 2013.

The credit card delinquency rate dropped to 1.36% in Q3 2013, down 14 basis points from the 1.50% reading in Q3 2012. On a quarterly basis, the credit card delinquency rate experienced a seasonal increase from 1.27% in Q2 2013. Credit card debt per borrower declined 1.3% over the last year to $5,235 in Q3 2013. Quarter over quarter, credit card debt essentially remained flat, increasing by only nine dollars.

The data provided are gathered from TransUnion’s proprietary Industry Insights Report, a quarterly overview summarizing data, trends and perspectives on the U.S. consumer lending industry. The report is based on anonymized credit data from virtually every credit-active consumer in the United States.

“While consumer credit card delinquencies increased on a quarterly basis, they continued an overall trend of strong performance as evidenced by the yearly decline,” said Ezra Becker, vice president of research and consulting in TransUnion’s financial services business unit. “Our data show that consumers continue to deleverage, with balances dropping in the past year and remaining near historical lows. It appears that, with continued strong credit performance and relatively low debt levels, consumers may be in a strong position to receive more attractive, feature-rich offers from credit card lenders.”

Every state experienced either a decline or had their credit card delinquency rates remain flat between Q3 2012 and Q3 2013. The largest delinquency declines occurred in Massachusetts, West Virginia and Washington.  All but two states saw their average credit card balances drop on a yearly basis, and the two states with increases – Rhode Island and Vermont – experienced only minimal rises.

TransUnion reported 334.23 million credit card accounts as of Q3 2013, up from 327.69 million in Q3 2012. It should be noted that this count was as high as 408.39 million in Q3 2008.

Viewed one quarter in arrears (to ensure all accounts are included in the data), new account originations increased to 11.05 million in Q2 2013, up from 10.41 million in Q2 2012. Though there appears to be more extension of credit card credit, this number pales in comparison to data observed six years ago when there were 17.74 million new account originations in the quarter.

TransUnion’s latest credit card report also found that the non-prime population (those consumers with a VantageScore® credit score lower than 700) continues to represent a smaller portion of all credit card loans at 29.06% in Q3 2013, down from 29.82% in the same period last year.

“Both the demand for and the supply of credit cards appears to be rising. It’s a good trend for consumers and lenders alike, particularly as delinquency rates remain low,” said Becker.  “Yet despite low delinquency numbers, card lenders have remained cautious in their underwriting, as can be seen by the differences in originations from the recent past in terms of both overall volume and the portion of new cards going to non-prime consumers.”

TransUnion is forecasting consumer delinquencies to rise in the fourth quarter to around 1.48% because of seasonality associated with holiday spending.  “Credit card delinquencies typically rise in the second half of the year, so this is not worrisome,” said Becker.

TransUnion’s forecast is based on various economic assumptions, such as gross state product, consumer sentiment, unemployment rates, real personal income, and others. The forecast would change if there were unanticipated shocks to the economy.

This information is reported by TransUnion and is part of its ongoing series of quarterly analyses of credit-active U.S. consumers and how they are managing credit related to mortgages, credit cards and auto loans. TransUnion’s previous quarterly reports utilized the company’s Trend Data database, which consisted of 27 million anonymous consumer records randomly sampled every quarter from TransUnion’s national consumer credit database. The latest reports now include nearly all active credit consumers.

As a global leader in credit and information management, TransUnion creates advantages for millions of people around the world by gathering, analyzing and delivering information. For businesses, TransUnion helps improve efficiency, manage risk, reduce costs and increase revenue by delivering comprehensive data and advanced analytics and decisioning. For consumers, TransUnion provides the tools, resources and education to help manage their credit health and achieve their financial goals. Through these and other efforts, TransUnion is working to build stronger economies worldwide. Founded in 1968 and headquartered in Chicago, TransUnion reaches businesses and consumers in 33 countries around the world on five continents.  www.transunion.com/business