Credit Delinquencies Drop

TransUnion Reports Positives in the US Credit Industry

At long last! We've lived to see some mitigation in the American credit card lending industry, as is reported by a major national credit bureau TransUnion. Not so long ago, its analysis of the US credit industry trends in 2008 depressed all of us by its deplorable results. Namely, the agency forecast that national credit delinquency rates (the rate of borrowers that are 90 or more days past due with their credit card payments) and average credit card debt per borrower would continue increasing, pulling US consumers further down into unmanageable obligations.

The new analysis allows us to hope for and, actually, expect some improvement of the situation. Is it the fist in many years sign that US consumers will have a real sigh of relief?

As apposed to the first analysis of credit industry trends, this report available on the official web site of TransUnion agency reveals that the average credit card debt and credit card delinquency rates experienced a slight sequential decline.

Quoting their figures, the average card debt per borrower dropped as much as 1.25% as compared to the previous quarter, in other words it decreased from $1,694 to $1,673. Not that much, but still. What's more, let's admit that it is twice as pleasing to watch debt figures dropping than otherwise.

Also encouraging is the reduction of credit card delinquencies ratio. Analysis shows that consumers are collecting bills on all their credit card accounts and working out a plan of managing their debts somehow. And such states as Florida, Nevada and California which citizens showed the worst behavior in managing their credit card bills in the last four quarters are demonstrating much more encouraging figures.

As a result, the national delinquencies ratio dropped to 1.9 % in the first quarter of 2008 and it is down 12.5 % as compared to the previous period. The analysis also reveals the delinquency rate drop is recorded not just in different states but across the whole country.

This is all perfectly good for now but TransUnion is not going to keep us happy for long and its forecast for the rest of the year should get us alerted. Consumers' finances and credit standings will be put at great risk due to the growing practice of buying gas on credit cards. The anticipated Increase in gas prices will get consumers to aggressively use their credit cards to pump up their vehicle. So, the credit card delinquencies rate is very likely to jump up back.

In their attempts to avoid the destructive results of consumers' delinquencies, banks and companies trim credit card limits for bad and good customers alike. Their policy is clean and clear - the less credit they give, the less loss of revenues they'll incur in case of defaults.

Some issuers resort to the elimination of 0% teaser periods on balance transfers as a proactive measure against delinquency customers, at the same time, however, lowering their purchase APRs.

So, it is still safe to say that US credit industry is experiencing some turbulence and this drop in debt and delinquencies is just another stage in the crisis development.

Bryant Park

Bryant Park is a financial consultant for one of the companies listed on Wall Street. He writes on a variety of topics ranging from credit cards to different loans that can be availed by consumers. He holds a bachelor degree in Financial Services from Dartmouth College.