Credit Card Delinquencies Poised to Rise, FICO Survey Data Suggest

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Many bank risk-management executives worry that credit card delinquency rates, which have been declining for more than two years, may begin to rise again soon if the economy does not improve, according to new FICO survey data.

The Minneapolis-based credit-scoring firm owned by Fair Isaac Corp. said 40% of 188 bank risk managers it surveyed in August expected credit card delinquencies to rise during the next six months.

Nearly half, 49.8% of respondents, said they believed average credit card balances will increase during the next six months, although 63.9% said they believed it is unlikely that credit card use will reach pre-recession levels for at least five more years.

Half of the risk-management executives said they believed it is unlikely that U.S. housing prices will return to 2007 levels before 2020. Moreover, 48.3% of respondents said they fear the U.S. is heading into another recession.

FICO conducted its online survey in collaboration with the Professional Risk Managers' International Association.

Separately, Equifax Inc. on Oct. 3 reported that total new U.S. bankcard account originations rose 27% during the first six months of this year compared with the same period a year earlier. Consumers opened 18 million new credit card accounts between January and June, a three-year high, Equifax said.

Borrowers classified as subprime, with Equifax credit scores below 660, opened 5.4 million new accounts during the first half of the year, up 64% from the same period a year earlier, the firm said. Subprime credit card accounts now account for 31% of all new bankcard originations, according to Equifax.

Bankcard credit limits also rose by a combined $45 billion between February and June of this year, while the percentage of borrowers whose accounts were at least 30 days past due fell.

Kate Fitzgerald is senior editor of PaymentsSource

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