Delinquency Rates on the Decline for July 2012

Equifax, one of the three national credit bureaus, recently announced the results of their National Consumer Trends Report which compared July 2012 to July 2011.  Credit card, home and auto finance delinquencies decreased by double-digit percentages from the prior year.  New credit increased, especially bank credit cards, although student loan debt and write-offs continued to increase.

Auto and home loans and credit cards

Auto loans 60 days or more past due decreased by 35 percent from July 2011 to 2012.

Consumer finance loans 60 days or more past due decreased by 23 percent from July 2011, compared to the same time the prior year.

Bank credit card accounts 60 days or more past due decreased by 21 percent from July 2011 to July 2012.

First mortgage severe derogatory rates decreased by 17 percent from July 2012, compared to the same time from the previous year.

First mortgages 30 days or more past due decreased by 15 percent year over year.

Home equity revolving accounts 30 days or more past due decreased by 7 percent from July 2012, compared to the same time the previous year.

New credit was $348 billion in May 2012, compared to $305 billion in May 2011 or a 13 percent increase.

The highest new credit increase was in bank credit cards which was $72.9 billion in May 2012, compared to $58.1 billion in May 2011 or a 21 percent increase.

“Consumers continue to improve their credit management, through higher monthly payments on card accounts, refinancing of existing mortgage debt at lower rates, and lower delinquency rates pretty much across the board,” says Equifax Chief Economist Amy Crews Cutts. “Growth in total credit is consistent with the overall improvement in the economy – slow, but steady – with the exception of mortgage debt which is declining overall. The decline in mortgage debt is due to loans converting to real estate owned at the end of the foreclosure process, homeowners paying down debt faster through cash-in refinancing, or shortening of the mortgage term as well as borrowers curtailing the debt by adding a bit extra to their payment each month,” she says.

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Student loans

Student loan write-off rates increased more than 29 percent from June 2012 to July 2012.

Student loan 60-day delinquency rates increased more than 14 percent from July 2011, compared to the same time the previous year.

Student loan balances increased $58.5 billion from July 2011 to July 2012.

Student loans totaled $116 million in July 2012, compared to $89 million in July 2011 or a 24 percent increase.

Severe derogatory balances (90 days or worst past due) were $7.3 billion, compared to $6.3 billion in July 2011 or a 14 percent increase.

“Student loans is one area of lending not affected by tighter underwriting standards since the start of the recession,” says Crews Cutts. “The investment in higher education pays off over a person’s lifetime, while the tuition cost has to be paid up-front, leading to big demand for student loans. Unfortunately, the current job market has not been kind to new graduates and their student loans start to come due once they graduate – if they don’t have a job by the time the first installment is due, they can find themselves in quite a jam.”

Credit Reporting Expert, 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.