By the end of this year, there will be enough credit to go around for consumers who need it, according to the most recent survey of bank risk assessment managers by FICO.
Sixty percent of the finance professionals surveyed by FICO, a company that analyzes consumer credit issues and assigns credit scores, expect the amount of credit extended to meet the demand requested by consumers in the second half of 2013.
This is the first time since the survey was introduced in 2010 that the predicted demand for credit has not outstripped the availability of credit. This is indicative of both a strong economic recovery for the United States—especially in contrast to European markets—and the increasing comfort level of consumers carrying debt, according to FICO.
“It appears that borrowers are beginning to shed the frugal habits that helped them deleverage to the tune of more than a trillion dollars since 2008,” said Andrew Jennings, FICO’s chief analytics officer. He also said that FICO’s latest European banking survey showed twice as many lenders who thought demand for credit would rise compared with those who expected credit availability to increase.
Credit card balances expected to increase as delinquencies decrease
Sixty-one percent of respondents in the U.S. survey felt that the average consumer credit card balance would increase over the second half of this year. However, only a quarter of respondents thought delinquencies would decrease, indicating that they believe people are going to be able to keep up with the payments on those increasing balances.
When it came to other types of debt, many risk professionals surveyed also thought delinquencies would drop across the board—except when it came to student loans. The percentage of respondents who expected delinquency rates for different types of loans to stay the same or drop through the remainder of 2013 were:
- Home mortgages: 88%
- Home equity loans: 85%
- Small business loans: 77%
- Auto loans: 76%
- Credit cards: 75%
- Student loans: 44%
The Professional Risk Managers’ International Association (PRMIA) conducted this survey on behalf of FICO during May and June 2013. It included responses from 149 risk managers at U.S. banks.