Are Credit Card Delinquencies Going Up, or Down?

Credit Card Delinquencies Decreased and More Cards Opened

TransUnion, one of the three major credit bureaus, conducts a quarterly analysis of credit-active U.S. consumers and evaluates how they manage mortgages, credit cards and auto loans.  This study covered the fourth quarter of 2011 and centered on credit cards.  Credit card delinquencies decreased by almost 5 percent from one year ago, but average credit card debt increased by almost 5 percent.

Credit Card Delinquencies

Credit card delinquencies (those 90 days or more past due) were below historical norms at 0.78 percent in fourth quarter 2011 compared to 0.82 percent a year ago, which was a decrease of 4.88 percent.    Even though average credit card debt remained near the record low, it increased from $4,965 in fourth quarter 2010 to $5,204 in fourth quarter 2011, or a 4.8 percent increase.

When comparing third quarter 2011 to fourth quarter 2011, credit card delinquencies and credit card debt per borrower increased due to seasonality. Credit card delinquencies were 0.78 percent in fourth quarter 2011 compared to .71 percent in third quarter 2011, a 9.9 percent increase.  Average credit card debt per borrower was $5,204 in fourth quarter 2011 compared to $4,762 in third quarter 2011, a 9.27 percent increase.

“2011 closed out with the lowest year-end card delinquency rate nationwide since 1995,” said Ezra Becker, vice president of research and consulting in TransUnion’s financial services business unit. “This is the net result of riskier loans having worked their way through the system, cautious risk management strategies on the part of lenders and consumers working to maintain the health and good status of their card relationships.”

New Credit Cards Opened

New credit card accounts opened increased by 14 percent over 2010, with more issued to those with lower scores.  VantageScores, which range from 501 to 990, were used in the study.  Credit cards issued to those with VantageScores below 700, increased by 15.6 percent over 2010.  The proportions were 21.8 percent in 2010 and 25.2 percent in 2011.  Some credit card issuers targeted those with lower scores, which are considered “non-prime”.

Data by State

Credit card delinquencies and debt were analyzed by state for the fourth quarter 2011.  The four states with the highest credit card delinquencies were; Mississippi (1.25 percent), Georgia (1.04 percent), Arkansas (1.03 percent) and Alabama (1.02 percent). The four states with the lowest delinquencies were: Alaska (0.41 percent), North Dakota (0.42 percent), Wisconsin (0.55 percent), and South Dakota (0.55 percent).

The four states with highest average credit card debt per borrower were: Alaska ($7,024), Colorado ($6,110), Connecticut ($5,822), and North Carolina ($5,814).  The four states with the lowest card debt were: Iowa ($4,120), North Dakota ($4,340), South Dakota ($4,422) and West Virginia ($4,455).

TransUnion forecasts that credit card borrower delinquency rates could continue to drift upward in the short term, but then begin to gradually drop towards the end of the year.

Credit Expert Witness, 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, Money & Identity

This post was written by John Ulzheimer