TransUnion is has released their forward looking statement on credit card delinquencies. If their analysis holds, demand for debt relief services should remain at current levels with no jump in sight.
Although the forecasts are trending upwards and showing a slow loading of the future pipeline for debt relief help with balances expected to increase and more sub-prime cards being issued.
Credit card delinquency rates (the ratio of bankcard borrowers 90 days or more delinquent on one or more of their credit cards) are expected to remain relatively low throughout 2013, increasing slightly from 0.83% in Q4 2012 to 0.87% in Q4 2013. Between 2000 and 2011, the credit card delinquency rate has averaged 1.24% during the fourth quarter. In the 51 quarters since Q1 2000, the credit card delinquency rate has only been below the 0.90% threshold 10 times.
“The credit card delinquency rate continued to remain low in 2012 after reaching its lowest level since 1994 in the second quarter of 2011,” said Steve Chaouki, group vice president in TransUnion’s financial services business unit. “We expect much of the same in 2013 as consumers have come to rely on their credit cards for liquidity with continued high unemployment rates and a stagnant economy.
“It should be noted that we have seen credit card delinquencies drift somewhat higher in the last year. Some of this can be attributed to the fact that credit card delinquencies were so low, that at some point they were bound to increase. A more significant factor may be that credit card originations have been increasing in the last few years, and with that increase we have seen non-prime borrowers receive not only more credit cards, but also comprise a larger share of new credit cards.”
The latest credit card origination data from TransUnion points to this increase in non-prime credit card borrowers. The share of non-prime, higher-risk originations (with a VantageScore® credit score lower than 700 on a scale of 501-990) was 29.55% in the second quarter of 2012, slightly higher than one year ago (29.28% in Q2 2011), and much higher than the 23.86% observed in Q2 2010.
Credit card debt per borrower, which has been relatively low since 2010, is expected to rise in the next year from its current $4,996 level (as of Q3 2012) to $5,050 in Q4 2012 and $5,446 at the end of 2013. This would be the highest credit card debt level since 2009. Average credit card debt per borrower peaked at $5,776 in Q1 2009.
Thirty-nine states and the District of Columbia are projected to see credit card delinquency increases in 2013 with only six experiencing declines. States expected to see the largest credit card delinquency increases in 2013 include Ohio (11.84%), Missouri (8.33%) and North Dakota 7.50%). However, all of these states still remain below their historic averages. The largest declines in 2013 are expected in Rhode Island (-7.59%), Montana (-5.88%) and Georgia (-5.21%).
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