Americans, particularly those in lower credit tiers, are grappling with financial strain and relying on higher-interest credit options, according to recent findings.
01/04/2024 1:50 P.M.
2 minute read
VantageScore’s November 2023 CreditGuage report, a monthly analysis highlighting the overall health of U.S. consumer credit, reveals that despite a relatively steady average credit score across the nation, many lower VantageScore credit tier consumers felt increasingly financially burdened at the end of the year.
This resulted in millions of consumers relying on personal loans or asking lenders for higher credit card limits to cover expenses and holiday spending.
As the nation grapples with the ongoing effects of the pandemic, the report suggests that a significant portion of the population is relying on credit to make ends meet, potentially setting the stage for increased financial pressure in the months ahead.
Here are some of the report’s major findings.
Delinquencies
The report finds that the Days Past Due (DPD) metrics on delinquencies increased year-over-year, with a notable spike in the 30-59 DPD category, from .68% to .90%. This trend extended to the 60-89 DPD and 90-119 DPD categories, indicating that financial stress is present across various loan types. However, the VantageScore Superprime segment (781-850) showed resilience, experiencing an increase only in the 60-89 DPD category.
Personal Loans
The report also highlighted an increase in early-stage personal loan delinquencies, surpassing pre-pandemic levels for the second time this year. Month-over-month, delinquencies rose from .87% to .99%, revealing heightened financial pressure on consumers. Across all DPD categories, personal loan delinquencies exceeded pre-pandemic levels.
Credit Card Balances
During the holiday season, credit card balances witnessed a significant rise, increasing by 9% compared to November 2022. However, the report raises concerns as credit card balances rose at a faster pace than the annualized inflation rate and wage gains.
“There is a growing concern that some consumers’ holiday spending is adding unsustainable levels of credit card and personal loan debt,” said Susan Fahy, executive vice president and chief digital officer at VantageScore. “Consumers need to be vigilant when managing their debt obligations heading into 2024.”
Remember, subscribe to ACA Daily and Member Alerts under your My ACA profile when logged in to acainternational.org to receive updates on the ACA Huddle.