Consumer credit delinquencies have spiked to the highest level in nearly four years, according to recent findings.
03/18/2024 11:50 A.M.
2 minute read
VantageScore’s January 2024 CreditGauge report, a monthly analysis highlighting the overall health of U.S. consumer credit, reveals borrowers across all credit products experienced a higher level of economic stress in January, perhaps due to sustained inflation and moderately worsening employment levels.
“Consumers are struggling with higher credit balances and falling behind on paying their bills, in part due to sustained inflation,” said Susan Fahy, executive vice president and chief digital officer at VantageScore. “With the Fed indicating that they are unlikely to cut rates soon, both lenders and consumers will need to remain vigilant in managing credit levels.”
Key findings from the report:
Delinquencies Rose
The report found that delinquencies climbed across all VantageScore credit segments in January. Overall early-stage delinquencies increased 0.9 points from 0.89% in December 2023 to 0.98% in January 2024. This was the second-largest monthly increase in the last four years.
Credit Usage is High
Overall balances remained high year-over-year, the report found, increasing $1,879 (+1.8%). The overall usage rate saw a small decline of 0.1% after a temporary increase over the holiday shopping season.
New Account Originations Slowed
The report also highlighted a decline in new account originations across all products in January 2024 compared to December 2023, as well as year over year. Credit card originations, after rising each month during the fourth quarter of 2023, fell the most in January 2024 compared to December 2023, down 0.38%. This reflected the seasonal lending pullback post-holidays. The report also found that auto loan and mortgage originations saw their fourth consecutive month of decline.
VantageScore Prime Credit Tier Shrank
Year-over-year, the VantageScore’s prime credit tier contracted 1%, which caused the VantageScore Superprime and Subprime segments to rise 0.7% and 0.3% respectively.
“The average consumer falling out of the prime tier is a consumer [who’s] generally younger, [who] is generally less affluent, and who typically doesn’t own a home,” said VantageScore President and CEO Silvio Tavares on Yahoo! Finance LIVE. “And those consumers have less of a cushion to weather the economic shock. The reality is if you look across consumers, overall, they’re doing well but this segment is struggling.”
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