Subprime and Nearprime Credit Tiers Weaken and Lending Origination Slows As Financial Institutions Exercise Caution
Today, VantageScore released CreditGauge, a monthly analysis that highlights the overall health of consumer credit in the United States. May’s CreditGauge shows that May 2023 delinquency rates continue to rise year-over-year across all credit products and Days Past Due (DPD) categories.
KEY FINDINGS:
DELINQUENCIES RISE YEAR-OVER-YEAR: Delinquencies rose across all days past due categories on a year-over-year basis, jumping from 0.16% in May 2022 to 0.25% in May 2023 for 60 DPD payments. A similar trend occurred for 90 DPD which rose 0.07% to 0.10% year-over-year. Most lenders report a missed payment after payment is 30 days late to the national credit reporting agencies (NCRAs).
NEW LOAN ORIGINATION SLOWS: Following a brief increase in April, new loan originations slowed in May across all product categories and all VantageScore credit tiers. Month-over-month auto loan new account originations decreased the most (.21%), followed by credit card (.17), personal loans (.09%) and mortgages (.01%). Lenders were more cautious when issuing new credit, while consumers remain challenged with higher interest rates that tend to increase the monthly costs of new loan obligations.
AUTO LOAN DELINQUENCIES HIGHEST AMONG LOAN PRODUCTS: At the product level, auto loan delinquencies remainhighest in both the 30 and 60 DPD categories,with the 30-day delinquencies recording its largest year-over-year increase in 2023. Auto loan delinquencies are today near pre-pandemic levels (January 2020) for 30, 60 and 90 DPD categories.
SUBPRIME AND NEARPRIME WEAKEN: Among VantageScore borrower tiers, Subprime and Nearprime weakened, recording increases in both month-over-month and year-over-year delinquencies across all DPD categories For Subprime, 60-day delinquencies rose a full percentage point year-over-year in May, from 2.8% to 3.8%, while Nearprime borrowers showed weakening credit across all categories. Year-over-year Prime and Superprime remain largely healthy.
With student loan payments set to resume in August after a three-year pause, a recent VantageScore student loan analysis noted that between 34% to 76% of borrowers may miss their first required federal student loan payment, which could result in a decline in their credit score.
“The May VantageScore CreditGauge report indicates that an increasing number of consumers are struggling to make their monthly loan payments,” said Susan Fahy, Executive Vice President and Chief Digital Officer at VantageScore. “With the expected restart of student loan payments, consumers will need to be extra vigilant in managing their finances to keep from falling further behind and potentially damaging their credit profiles.”
To view the full CreditGauge report, visit CreditGauge.
About VantageScore CreditGauge™
CreditGauge is provided both as a monthly report to industry stakeholders, as well as through a series of interactive tools at VantageScore.com. Stakeholders can use the tools to execute additional queries on credit metrics and compare current levels to a pre-pandemic timeframe, starting with January 2020. CreditGauge represents the views and opinions of VantageScore and does not necessarily reflect or represent the views of the Nationwide Credit Reporting Agencies (NCRAs)– Equifax, Experian, and TransUnion.
VantageScore CreditGauge content, including any estimated economic forecasts, is intended for informational purposes only. VantageScore is not responsible for use of the information contained in the CreditGauge report, including any assumptions or conclusions drawn from its use.
About VantageScore®
Over 3,000 banks, fin-techs and other companies use VantageScore credit scores every day to assess consumer creditworthiness. Last year, over 19 billion VantageScore credit scores were used representing a 30% yearly increase. Most top 10 US banks, large credit unions and leading fin-techs use VantageScore credit scores in one or more lines of business including credit cards, auto loans, personal loans and more.
VantageScore is an independently managed joint venture company of the three nationwide credit reporting companies (NCRAs) – Equifax, Experian, and TransUnion.
Contact:
Jeff Richardson | VantageScore
Email: jeffrichardson@vantagescore.com
Phone: + 1 (332) 222-0140
