TransUnion study reveals credit card delinquencies are the lowest in years

TransUnion, one of the three major credit reporting agencies, conducted their quarterly analysis of how U.S. consumers manage credit cards, mortgage and auto loans.  According to their analysis, the national credit card delinquency rate, defined as 90 days or more past due, dropped for the sixth consecutive quarter to .60%.  This is the lowest in seventeen years and the most improvement since 2009.

Even though the average credit card debt increased $20 per borrower to $4,699 in second quarter 2011 from first quarter 2011, this amount is still near record lows.  It is a decrease of 5.1% from second quarter 2010, which was $4,951.

Credit card delinquency rates declined 18.9% in second quarter 2011 compared to first quarter 2011; a rate of .6% compared to .74% respectively.  Comparing the delinquency rate from second quarter 2011 (.60%) to the same period a year ago (.92%), there was a 34.78% decrease.

Key reasons

According to TransUnion, the key reasons for the decrease are:

Consumers are spending less.

More delinquent credit card accounts have been charged-off.

Consumers are more responsible using their credit cards.

Consumers are not carrying as many cards.

Card issuers have lowered credit limits.

Lenders are still conservative in their lending practices. They are looking at employment, income, payment history and credit scores.

This is substantiated by a TransUnion report released in July 2011. The analysis found that consumers made $72 billion more payments to their cards than charged on them between the first quarters of 2009 and 2010.  This is a reversal from 2004 where consumers made $2.1 billion more in purchases.

Delinquency rates in states and metropolitan areas

All of the states including D.C. had declines in credit card delinquency rates between first and second quarters 2011, except North Dakota.  The states with the highest delinquency rates were Nevada (.93%), Georgia (.78%), Illinois (.77%) and Mississippi (.75%).  Those with the lowest delinquency rates were Alaska (.39%), North Dakota (.40%), Iowa (.41%) and Wyoming (.42%).

Metropolitan statistical areas (MSAs) also had declines in delinquency rates, with 83% having declines in second quarter 2011, compared to 74% in first quarter 2011, and 53% in fourth quarter 2010.

TransUnion forecasts that delinquency rates will continue to decline for the remainder of 2011 due to the slow economic recovery and conservative underwriting policies by lenders. It will be interesting to see if this trend continues.

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, Debt, Getting Credit, Improving Credit, Money & Identity, Saving Money

This post was written by John Ulzheimer