| August 14, 2012

TransUnion: Delinquency rates, credit balances near record lows

American borrowers improved the handling of their credit card debt in the second quarter, as both delinquency rates and balances remain near record lows, according to TransUnion.

The credit reporting agency said the national credit delinquency rate dropped to 0.63 percent in the second quarter, down from 0.73 percent in the first quarter – its lowest level since reaching 0.6 percent a year ago.

Average credit card balances increased slightly on a year-over-year basis from $4,699 to $4,971. However, balances still remain more than $700 lower than the figure from the second quarter in 2009.

Only five states saw increases in the delinquency rates from the first to the second quarter, while 20 percent of metropolitan statistical areas saw an increase in delinquencies.

Massachusetts, Mississippi and West Virginia all realized year-over-year increase in delinquency rates over 28 percent.

“The national credit card delinquency rate continues to remain at the lowest levels we’ve observed in 18 years,” said Ezra Becker, vice president of research and consulting in TransUnion’s financial services business unit. “It’s a positive situation because average borrower balances have increased over the past year as new card originations have grown. These low delinquency rates reflect both continued conservatism in lender underwriting and the ongoing prioritization of card payments among consumers.”

TransUnion also found that credit card originations increase around 4 percent from last year. Higher-risk consumers accounted for 26.1 percent of new cards, 0.9 percent lower than last year.

According to The Associated Press, the increase in originations is potentially tied to the fact that banks have increasingly offered credit cards to higher-risk borrowers because of increased competition for top-rated consumers. With many of the low risk Americans not applying for new credit, lenders have turned to those with not-so-perfect credit histories.

“The credit pie is bigger and non-prime consumers are getting a bigger slice of that pie,” Becker told the AP.

If consumers ever find themselves in trouble with their credit, they should seek out credit counseling services to help them assess the problem moving forward.

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