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Credit Card Delinquencies Dip as Balances Rise
7 Nov
Consumers are being more disciplined in their use of credit, which means delinquencies are down even as balances increase, according to a recent Equifax report. The National Consumer Credit Trends looked at data for auto loans, retail and bank credit cards, mortgages and student loan debt.

From August 2012 to August 2013, auto, bank and retail credit card balances all increased, and those higher balances went hand-in-hand with lower delinquency rates. Retail credit card balances have been growing for 24 consecutive months, while total auto loans are at a five-year high.

Equifax chief economist Amy Crews Cutts says the data “indicates that the American consumer is being very disciplined in their use of credit. It's like they've gone on a debt diet and they are really sticking to it, with modest increases in line with capacity to repay."

Total consumer debt is down 15% from its highest level, and default rates have returned to their pre-recession numbers, excluding student loans. Mortgages and student loans continue to have high delinquency rates in the wake of the economic crisis. “Hopefully we will see those improve more quickly in coming months," said Cutts.

Auto loan data shows a total of more than 61 million loans outstanding in August 2013, the highest in 57 months. Bank-issued credit card loans stand at $93.3 billion, a five-year high. Retail credit cards are at $34.2 billion, with 18 million new loans originating between January and June of this year. Home loans are broken down between first mortgages and home equity lines of credit, with first-time borrower loans at $7.7 trillion and home equity loans at $136.7 billion.

Loans to subprime borrowers are up in the retail credit card category, indicating lenders more willing to take risks on those with limited credit. Equifax defines subprime borrowers as those with a score lower than 660.

More credit being issued to high-risk borrowers is widely regarded as a sign of an improving economy. Increasing balances combined with falling delinquency rates is also an indicator of better economic times, because it means borrowers are confident about taking out more loans and are able to keep up with the payments on those loans.

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