Written by Janet Dedrick on May 17, 2010 in Credit  |   2 comments

Credit Trends: Predicting the Future using Credit Report Numbers
By Janet Dedrick

The news about the economy is confusing to say the least. One columnist predicts that we’re going to see the recession continue for another year, while an economist in another newspaper says that everything is getting better.

When economic data is released, like the weekly or monthly unemployment numbers, the media reports it any number of ways. We gained 290,000 jobs in April 2010, but the official number of unemployed Americans increased. How is anyone supposed to make sense of these numbers?

As an Equifax analyst, I get to see a lot of raw data that isn’t widely available. When I look at information on mortgage loans, student loans, and bank cards and see how consumers are handling their credit, trends begin to emerge.

The good news is that even with all the confusing and negative economic reports being released, I’m starting to see some positive trends.

Here’s what the data is telling me at the moment:

1. Early-stage delinquent balances are declining year over year. An early-stage delinquent balance is usually considered to be 30 days late, or one missed payment. A decline in early-stage delinquent balances is a sign that we’re moving toward more economic stability. Even better, I’m seeing the same decline in early-stage delinquencies across many types of credit, including mortgages, home equity lines of credit, bank cards, and auto loans. I’m thinking this could be a sign that people have more cash available and are paying more of their bills on time. As early stage delinquencies improve, late stage delinquencies – 120 days plus, or four or more missed payments – subsequently improve. Bankcard, auto loan, and home equity line delinquencies for early to late stage delinquencies are improving, with mortgage delinquency still the most troublesome spot.

2. There are higher numbers of some types of new lines of credit. Although it’s still somewhat sparse, we’re starting to see a pickup in auto loans corresponding to the increasing number of cars purchased. I think we have already hit the bottom of the cycle when it comes to auto loans, and now we’re seeing things move in the right direction. Of course, car sales were exceptionally low last year, so the year-over-year comparisons are going to look good. As of January/February 2010, we’re seeing an increase of 20 percent, or almost 200,000 new auto loans (for new and used cars) over last year.

3. Consumers are being smarter about their credit. The higher number of auto loans tells me that consumers are getting more confident about what’s going on in the world. You have to be confident to make a $30,000 or $50,000 car purchase. But consumers are also being smarter. The average size of an auto loan is $18,300, which is less than before the recession, so consumers are being prudent about taking on more debt.

4. The rate of decline for bank cards being issued is slowing. While we’re still seeing a decline in the number of bank-issued credit cards, the rate of that decline is slowing. To me, that’s a sign that we’re nearing the bottom, and I predict that we’ll see an increase in card issuance later this year. Credit expansion would be a good thing for consumers.

What are you seeing? Are your creditors still cutting back on your credit card available balance or your home equity lines of credit? Leave your comments and questions here, and we’ll see if we can make sense of some of the confusing data you see in the news.

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1. Eva Rosenberg, EA says:

   May 18, 2010 at 12:50 am

   Hi Janet,

   Thanks for the upbeat news.

   I am still nervous.

   I still see people in homes they are trying to keep, where they are upside down.

   None of the financial bailouts helped them. Either their incomes were too low (just hanging on by their fingertips, getting paid sporadically), or their incomes were too high (but half of what it used to be) to qualify for any reduced interest rates or loan modifications.

   Believe it or not, there are still people who are stubbornly trying not to go into default.

   They don't show up in the stats (enemployment or defaults), because they've taken lesser work just to try to keep minimum payments up. Or they're off the grid because they've been unemployed for so long they can no longer collect benefits. Or they have taken dramatic pay cuts on their present jobs, simply in order to keep their jobs.

   But they're paying their bills.

   These are my heroes!

   Thanks to you and your team for being here!

   Eva

   Your TaxMama

   Reply
2. ssophies says:

   May 21, 2010 at 8:08 am

   Excellent site, keep up the good work. I read a lot of blogs on a daily basis and for the most part, people lack substance but, I just wanted to make a quick comment to say I’m glad I found your blog. Thanks
   ==============
   http://www.mastercreditcard.net

   Reply

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