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New Credit at Highest Point Since 2008, Equifax Reports

May 2, 2012
4 min to read


ATLANTA - The credit landscape continues its consistent recovery heading into the second quarter of 2012, with the exception of home finance, according to Equifax's March National Consumer Credit Trends Report.


At the end of the first quarter, U.S. consumer debt was at $10.9 trillion, down more than 11 percent from its peak of $12.4 trillion in October 2008. Additionally, credit write-offs are 50 percent lower than in March 2009, when banks wrote off a total of $39.7 billion. In March 2012, the number stood at $20 billion, reflecting stronger consumer finances.

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“During the recession, the average size of delinquencies rapidly increased as dollar rates were outpacing total number of delinquent accounts, a trend that has since reversed in auto, bankcard, consumer finance, and retail card categories,” the report read, in part.


More than 72 percent of total delinquencies are still tied to loans originated between 2005 and 2007, which account for 36 percent of balances outstanding. Loans opened in 2009 and later have performed much better, the report said. Only 12.6 percent of delinquent accounts are from credit lines or loans opened in or after 2009.


New non-mortgage credit balances continue to increase, while new auto, bank and retail cards, consumer finance, home equity and student loan credit rose to $61 billion in January 2012, an 11 percent increase over the same time a year ago when new accounts totaled $55 billion.


"Lower delinquency rates and fewer write-offs coupled with the growth of new credit across multiple sectors clearly outlines the increased activity of consumers and their renewed faith in the marketplace heading into the second quarter," said Equifax Chief Economist Amy Crews Cutts. "Aside from Home finance, which will require a longer recovery time due to long foreclosure process, the data reflects the improving U.S. economy as consumers explore new financial options and exercise due diligence in repaying their existing debts."


The following are key from the Equifax report:

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Auto

  • Auto loan and lease balances rose to a post-recession high of $727.5 billion in March 2012.

  • Auto finance loans totaled more than $380 billion — the highest since the third quarter 2009. Delinquency rates among all auto loans are at their lowest point in five years.

  • Auto sales are rising fast and new auto loans to pay for them are also growing. New auto loans obtained from banks in January 2012 rose to 728,000 accounts, up from 630,000 a year ago, while new auto loans from finance companies grew to 753,000 accounts from last January's 735,500.

Bankcard and Consumer Finance

  • Outstanding bankcard balances in March 2012 stood at $532.8 billion, an $8 billion decrease from the previous year; however, this is a modest drop compared to the decrease of more than $54 billion seen from 2010-2011.

  • In March 2012, delinquencies and write-offs among existing bankcards were well below pre-recession levels and the lowest in five years.

  • Available credit, the difference between credit limits and balances, is climbing and in March 2010 reached nearly $1.9 trillion, the highest since September 2009.

  • New consumer finance loan volume totaled 1.4 million new accounts in January, an increase of 8 percent from the same month a year ago.

  • Consumer finance loans taken out in January totaled $4.3 billion, a 12.1 percent increase over January 2011 volumes.

Student Loans

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  • While still elevated from previous years, write-offs decreased from the March 2011 and March 2012 period, the first reverse in the trend in six years.

  • The average amount per new loan is currently $4,548, down nearly 20 percent from Jan. 2011 ($5,572). This was the first decline in three years.

  • Similarly, loan amount per student dropped 12 percent to $6,917 vs. the same time last year.

  • Borrowers between the ages of 30 and 29 took out 17 percent of the number of new student loans in January, equating to nearly 15 million loans. However, their loans represent 24 percent of the total dollar amount of new student loans opened in January (approximately $157 billion).

  • Conversely, the 23-and-under age range took out nearly twice as many loans (just over 30 million), yet account for nearly the same total dollar amount.

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