Managing Debt

Delinquency Drops Once Again in Second Quarter

October 9, 2012 by Credit.com 0 Comments

Consumers have been very interested in cutting all of their late payments in the last several months or more, and seem to have been successful in doing so overall in the second quarter of the year.

Industry-wide instances of delinquency – defined as payments that are 30 days or more past due – slipped between April and June to just 2.24 percent of all outstanding balances, according to the latest Consumer Credit Delinquency Bulletin released every quarter by the American Bankers Association. That was down from 2.35 percent of balances in the first quarter, and well below the 2.4 percent average observed over the last 15 years.

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Perhaps the most notable of individual account types that saw improvements during the second quarter came on credit cards, the report said. During that three-month period, delinquency on these accounts slipped to just 2.93 percent of all outstanding balances, down from 3.08 percent. However, that was also the first time this rate has slipped below 3 percent since 2001, and was nearly a full point below the average delinquency rate seen over the last decade and a half, which stands at 3.91 percent.

However, these numbers may be somewhat misleading, the report said. In all, six of the eight types of closed-endedloans tracked by the ABA saw instances of delinquency rise, as did two of the three open-ended lines of credit. The only three loan types with fewer delinquencies were credit cards, indirect auto financing (arranged through third parties like dealers) and mobile home loans.

Further, that meant declines in all three loans associated with consumers’ properties, the report said. Home equity loans, and lines of credit, in addition to financing for property improvements, all saw more delinquency, which can be viewed as an indicator that the shaky housing market still has a lot of room for improvement, which is unlikely to come soon.

“While the housing market appears to have turned a corner, we are many quarters away from seeing improvement filter through to reduce home-related delinquencies,” said James Chessen, chief economist for the ABA.

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Consumers have generally been more conscientious about slashing outstanding debts since the end of the recession, which forced many to rethink their attitudes toward borrowing and carrying balances in general.

Image: manwithface, via Flickr