The June 2023 VantageScore CreditGauge report highlights key insights into the state of U.S. consumer credit. Despite a minor decline in the average VantageScore credit score, consumers continued to manage their credit cautiously, with overall loan balances and credit utilization remaining flat. However, delinquency rates showed a concerning increase compared to the same period a year ago. The report also shed light on the rebound of new loan originations, although credit standards and approval criteria remained tightened. Let’s delve into the key findings:
Delinquency Rates on the Rise:
June 2023 witnessed an overall increase in delinquency rates across all days past due (DPD) categories compared to the previous year. The most significant jump occurred in early-stage delinquencies (30-59 DPD), rising from (+0.71%) in May to (+0.82%) in June, marking the largest month-over-month increase in the past 12 months. This rise in delinquencies can be attributed to challenges faced by certain consumers in making on-time payments amid high-interest rates and sustained inflation.
Credit Card, Auto Loan, and Personal Loan Delinquencies:
Delinquency rates for credit cards, auto loans, and personal loans showed notable changes. In the 30-59 DPD category, Auto Loans and Mortgages recorded the most significant increase (+0.12%) month-to-month. While the 60-89 DPD category experienced an uptick in delinquencies for all products, the 90-119 DPD category saw only Credit Card delinquency rates slightly decrease (+0.01%). The delinquency rates for credit cards, auto loans, and personal loans were found to be near or above pre-pandemic (January 2020) levels across all DPD categories, suggesting that rising living costs and debt obligations have impacted consumers’ monthly budgets.
Rebound in New Loan Originations:
Despite elevated delinquency rates, lenders remained active in issuing new loans. June 2023 saw a rebound in new loan originations across all credit products and tiers. Personal Loans experienced the most significant increase (+0.4%) month-over-month, followed by Credit Cards (+0.24%), Auto Loans (+0.13%), and Mortgages (+0.05%). However, new loan originations still remained below levels observed a year ago, indicating the continued tightening of credit standards and loan approval criteria.
Insights from VantageScore:
Susan Fahy, Executive Vice President and Chief Digital Officer at VantageScore, highlighted the interesting dynamic where delinquency rates across most products have returned to pre-pandemic levels, while lenders continue to extend credit in the current high-interest rate environment. This cautious yet proactive approach by lenders reflects the need to balance credit accessibility and risk management.
The VantageScore CreditGauge report for June 2023 reveals the evolving landscape of U.S. consumer credit. While the average credit score remained relatively stable, delinquency rates registered an increase from the previous year. Consumers exercised caution in managing their credit, evident from the flat loan balances and credit utilization. However, lenders demonstrated resilience by rebounding with new loan originations despite ongoing credit tightening measures. As the credit market continues to evolve, monitoring delinquency rates and understanding credit dynamics will play a crucial role in maintaining a healthy credit environment for U.S. consumers.
