A new report from VantageScore shows that overall balances increased, while lenders tightened new account originations due to growing credit quality concerns.
03/01/2024 3:05 P.M.
2 minute read
VantageScore, a prominent credit-scoring and data analytics company, has released its January 2024 CreditGauge report, providing a comprehensive analysis of the U.S. consumer credit landscape, according to a recent press release.
The report highlights significant shifts in credit dynamics, with delinquencies reaching their highest level in nearly four years, impacting various credit segments. The economic landscape, marked by sustained inflation and worsening employment levels, has led to notable changes in consumer behavior and lender practices.
Here are the key findings from the January 2024 CreditGauge data:
- The average VantageScore 4.0 credit score remained at 701. This score, ranging from 300 to 850, reflects stability in the overall credit health of consumers.
- Delinquencies surged across all VantageScore credit tiers and products in January 2024, including auto loans, credit cards, mortgages, and personal loans. Early-stage delinquencies increased by 0.9 points from December 2023, reaching 0.98%, marking the highest level since February 2020. Economic stress, fueled by inflation, has contributed to this rise.
- Overall balances reached a new high in January 2024, totaling $104,622, a 1.8% year-over-year increase. Despite a slight credit utilization dip of -0.1%, borrowers faced heightened economic stress, driven by sustained inflation and worsening employment levels.
- The VantageScore Prime credit tier experienced a 1% decline as consumers migrated to both superprime (+0.7%) and subprime (+0.3%) tiers. Higher credit score individuals in the superprime tier continued to meet debt obligations, while those with lower credit scores faced stress, leading to the growth of the Subprime tier.
- New account originations declined across all credit products in January 2024 compared to December 2023. Credit card originations, after a rise in the fourth quarter of 2023, fell the most in January 2024 by 0.38%. Auto loan and mortgage originations saw their fourth consecutive month of decline, with auto loans decreasing by 0.09% and mortgages by 0.03%.
- Banks and lenders tightened new account originations for the first time in several months due to growing credit quality concerns. The economic challenges and rising delinquencies have prompted a cautious approach among lenders.
- VantageScore, used by eight out of the top 10 U.S. banks and over 3,000 fintechs and consumer websites, saw a 30% increase in credit score usage in 2023 compared to 2022. Over 19 billion VantageScore credit scores were used in 2023 for assessing credit eligibility for various products.
“Consumers are struggling with higher credit balances and falling behind on paying their bills, in part due to sustained inflation,” said Susan Fahy, executive vice president and chief digital officer at VantageScore. “With the Fed indicating that they are unlikely to cut rates soon, both lenders and consumers will need to remain vigilant in managing credit levels.”
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