Subprime consumers are being offered more credit cards but delinquency rates remain low, according to the latest TransUnion (NYSE:TRU) Industry Insights Report.
The credit card delinquency rate (the ratio of borrowers 90 days or more delinquent on their general purpose credit cards) remained steady at 1.19% in Q2 2015. The delinquency rate was essentially unchanged from 1.17% in Q2 2014. Along with new account growth in the subprime credit tier (those consumers with a VantageScore 3.0 credit score lower than 601) originations, the average new account credit line for subprime consumers continued to drop in Q2 2015. The average new credit line for the tier declined to $923 in Q2 2015, the lowest mark since Q2 2012, when average new account lines reached $896."Subprime consumers continue to gain access to credit, but lenders have scaled back the average new credit line for this group, said Paul Siegfried, senior vice president and credit card business leader for TransUnion. "Distribution of originations across risk tiers has remained relatively steady in the past year, indicating that lenders are deliberate and approaching subprime originations cautiously.Viewed one quarter in arrears to ensure the large majority of accounts are included in the data, new account originations increased 11.2% from 11.7 million in Q1 2014 to 13.1 million in Q1 2015. New account originations were largely driven by the subprime risk tier, which accounted for 18% of all account originations, up from 14.7% in Q1 2014.Average credit card balances per borrower declined slightly from $5,234 in Q2 2014 to $5,199 in Q2 2015. The average balance increased 1.1% quarter-over-quarter, up from $5,142 in Q1 2015. Super Prime consumers (those consumers with a VantageScore 3.0 credit score 780 or higher) experienced the largest average balance growth, up 1.4% from $2,316 in Q2 2014 to $2,349 in Q2 2015."The credit card market is experiencing stabilization as delinquencies and average balance per borrower remained steady in the second quarter," said Siegfried. "Super Prime consumers have increased average balances slightly, a reflection of higher consumer confidence to purchase and carry a balance, which is a positive sign for the industry."Up from 154.2 million in Q2 2014, the number of consumers with credit cards increased by 6.8 million year over year. Credit card issuers reported 160.17 million consumers with credit cards in Q2 2015 to TransUnion. "We are seeing that new accounts and users of credit are a key growth driver for the first half of 2015," said Siegfried.The number of consumers under age 30 with a credit card balance rose to 20.73 million in Q2 2015, an 8.6% increase from 19.09 million in Q2 2014. The delinquency rate for the youngest consumer group remained above the national average in Q2 2015 at 1.80%. Average balances for the under 30 group rose slightly, up $19 from $2,135 in Q2 2014 to $2,154 in Q2 2015. "From Q2 2014 to Q2 2015, 1.6 million more consumers under age 30 had a credit card balance, which demonstrates this groups appetite for credit," said Siegfried. The under 30 age group had the largest increase of any age group, yet average balances have remained steady year over year. Were observing consistent credit management skills from this group."Thirteen states experienced a decline in their delinquency rates, with Alaska (down 10.1% from 1.19% in Q2 2014 to 1.07% in Q2 2015), Washington (down 4.1% from 0.87% in Q2 2014 to 0.83% in Q2 2015) and New Hampshire (down 1.02% in Q2 2014 to 0.99% in Q2 2015) experiencing the largest declines. Average credit card balance per consumer declined in 39 states, while three states remained unchanged. North Dakota (up 0.9% from $4,283 in Q2 2014 to $4,322 in Q2 2015) and Hawaii (up 0.7% from $5,539 in Q2 2014 to $5,579 in Q2 2015) experienced the largest average balance increases.