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Delinquencies to Keep Dropping, Lending to Keep Expanding

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Consumers have been far more conscious of their abilities to stay current on their various outstanding lines of credit in recent months, and now many experts say that this trend will likely continue for at least the next six months.

Credit risk experts say that they generally expect to see delinquencies on nearly all types of consumer credit to slip between now and the end of the third quarter of the year, according to the latest quarterly survey from the credit scoring bureau FICO. Only one type of consumer credit – student loans – was expected to rise in that period by more than half of the experts, and even then, just barely. Only 51% of respondents felt this way.

Meanwhile, 68% of respondents said they thought delinquencies on consumers’ credit card accounts would either stay at their current levels or continue falling in the coming six months, up from 61% in the previous survey, the report said. Further, that’s the best total seen since the end of the second quarter of 2011.

“These results are consistent with the general sentiment that delinquencies will be less of a problem over the next six months,” said Dr. Andrew Jennings, chief analytics officer at FICO and head of FICO Labs. “As lending risk – both perceived and real – declines, the natural reaction by lenders is to loosen the purse strings and extend more credit. This should be welcome news to consumers and businesses alike, because increased access to credit is a key driver of economic growth.”

As a consequence of more expected tumbles for delinquency, lenders also believe banks are more likely to continue opening new lines of credit to consumers, the report said. In all, 77% of respondents said they thought car loan offerings would either meet or exceed demand, and 71% felt the same way about credit cards. A smaller number, but still more than half, responded similarly to questions about small business loans and student loans. Only mortgages remained a concern for many lenders, with just 44% saying they thought they could meet or exceed consumer demand.

Lenders have already been expanding their efforts to offer lines of credit to consumers who might have suffered some sort of shortfall during the recent recession, particularly in the marketing of new credit cards to subprime borrowers.

Image: Quazie, via Flickr

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