TransUnion’s study on credit card behavior

According to a study conducted by TransUnion, one of the three consumer credit reporting agencies, the trends of credit card behavior have changed and credit card holders are paying more than they spend on credit cards.  This is great news.

Credit card holders paid $72 billion more towards their credit card accounts than new purchases on their cards in the first quarter of 2010 as compared to the first quarter of 2009.  The largest contribution to this amount was by those with higher credit scores.  Those with scores below 600, which are considered subprime, charged less because their accounts were charged-off.

Key reasons for the change

Card issuers reduced credit limits

Consumers spent less

Consumers were more cautious about adding more debt

Card issuers charged off accounts that were severely past due

Card issuers closed accounts

Home equity lines of credit

Home equity lines of credit have traditionally been used for major purchases such as home improvement, medical expenses and/or education. Home equity lines of credit, also referred to as HELOCS, are revolving accounts with a credit limit, variable interest rate, minimum monthly payment, and the home is used as collateral assuming you have equity in your home. Since the peak in 2006, home equity lines of credit dropped 96%.  Since 2008, many lenders froze home equity lines of credit or canceled them. The primary reason…many homes do not have equity any longer because of plummeting values.

If you are in the group that has been paying down your credit card bills, keep up the good work.  Card issuers are beginning to loosen up their credit policies and increasing pre-approved offers for credit. They may target you for these card offers, and all you have to do is accept the offer.

John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.

Categorised in: Credit Cards, Credit Report, Credit Score, Money & Identity

This post was written by John Ulzheimer