Consumer delinquency rates remain low as credit spending increases

Experts are projecting the U.S. consumer will perform well again throughout 2020. Globe Newswire reports we are currently experiencing “one of the longest periods of sustained positive credit activity” we’ve seen in recent decades. Economists believe factors such as low unemployment rates, wage growth, GDP growth, and high consumer confidence are all primary contributors to consumers’ recent increased use of credit cards.

Overall delinquency rates down

Currently, serious delinquency rates for credit cards, mortgages, auto loans, and unsecured personal loans, are expected to decline or remain about the same. When looking at all types of debt, reports indicate credit cards are anticipated to have the highest level of delinquency, but these are still lower than previously.

Credit spending is surging

Bloomberg reports December's total credit rose by $22.1 billion over November, exceeding economists’ projections. A MarketWatch report indicates consumer borrowing “surged” in December 2019 for both credit card purchases and revolving credit – these jumped up 14% in December. As a comparison point, the Fed reported revolving credit in November was -3.2% and October 6.3%.

The last time this pace of credit card debt growth appeared was in April 1998. On Jan. 29, 2020, Fed Chairman Jerome Powell said, “Household debt to GDP has been coming down since the financial crisis…it is in a very good place.”

Millennials and Gen Z more comfortable with credit cards

Data is showing millennials, despite reports about their student loan debt, are not as credit-averse as many believed them to be. Millennials (people aged 23 – 38) have been increasingly using credit cards to make purchases, only surpassed by Generation Z (consumers aged 18-22). The numbers show millennials increased their average credit card debt by about 7% in the last year while Gen Z’ers increased their credit card spending by 11%, according to CreditCards.com.

Access to credit cards

CreditCards.com also reported the percentage of credit card applicants rejected for credit was at 17.6% last year. This is a decrease from 2018 which averaged at 19.9% rejections for credit. The average credit line for those approved was about $8,540, which is roughly about a $500 increase from 2010. However, subprime consumers saw lowered credit lines. In 2010, the average credit line for this group of consumers was just shy of $3,100, but in 2019 has fallen to about $2,420. People with the lowest credit standing are averaging credit limits of about $575, down 17% since 2015. Those with strong credit standing are enjoying larger credit limits.

Your credit score has a direct impact on your access to credit, more attractive interest rates, and higher credit limits. The better your score, the more financial freedom you’ll have when looking to make purchases.

At PRBC, we are committed to helping people improve their credit scores. Our alternative credit score model enables people to rebuild their credit by paying their usual bills, like utility or phone bills. As a result, they enjoy better access to credit with more attractive terms.

If you’d like to learn more about how you can improve your credit standing, contact us today to learn how PRBC can help.