Smart Borrower Blog

Consumer Credit Delinquencies Fell in Third Quarter


Jan 21st, 2015 @ 9:32 PM by Amber Nelson


U.S. consumers continued to keep up with their debt payments in the third quarter of 2014, according to data from the American Bankers Association’s Consumer Credit Delinquency Bulletin.  Delinquencies – payments that were late by 30 days or more – only rose in three of the 11 categories the ABA tracked, showing that Americans are largely paying down their debts and managing their finances better than before the financial crisis.

“Strong economic growth has boosted job creation and supported income growth, which has made it easier for consumers to meet their financial obligations,” said James Chessen, ABA’s chief economist. “Lower gas prices helped free up resources for everything from new purchases to debt repayment.”

The ABA’s composite ratio, a measurement of late payments on eight closed-end installment categories dropped to a new record-low of 1.51 percent in the third quarter down from 1.57 percent the previous quarter. By comparison, the 15-year average is 2.30 percent.

The loan types that saw improvements in their delinquencies rates included personal loans, indirect auto loans, RV loan, marine loans, property improvement loans and home equity loans. Direct auto loan delinquencies were unchanged and the rate of mobile home late payments was the only closed-end category that saw an increase.

Among open-end loans or revolving credit, bank cards and home equity lines of credit experienced delinquency growth. Bank card late payments rose to 2.51 percent from 2.43 percent while the rate on home equity lines grew to 1.52 percent from 1.50 percent.

“Bank card delinquencies have hovered near 15-year lows with only minor fluctuations over the past two years, and we expect that trend to continue,” said Chessen. “While people are clearly ready to spend again as economic activity picks up, the overwhelming majority of consumers continue to keep debt at manageable levels.”

Chessen also explained that the rise in home loan delinquencies was to be expected.“As the housing market continues its slow and steady recovery, home-related delinquencies are following a parallel track,” he said. “Increased home prices have eased pressure on consumers, but stresses can still occur.”

Overall the report signals that consumers are on “surer financial footing” he added, which can only mean good things for the economy in the coming year.

 

About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.

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