VantageScore, a joint venture of the three major credit bureaus (Equifax, Experian, and TransUnion) managed by an independent body, VantageScore, has released its June 2024 CreditGauge report, offering a detailed analysis of the current state of U.S. consumer credit. The report highlights record-high credit originations year-to-date across all generations and credit tiers, fueled by increased bank lending. However, it also underscores growing concerns over consumer financial health, as delinquency rates remain elevated.
Credit Originations Surge
Credit originations have reached unprecedented levels in 2024, with banks extending credit more liberally across various consumer credit tiers. This surge reflects a robust lending environment as financial institutions display confidence in the credit market’s resilience.
Credit Scores Remain Steady Amid Rising Delinquencies
The average VantageScore 4.0 credit model score held steady at 702 for the fourth consecutive month. VantageScore 4.0 ranges from a low of 300 to a high of 850. Despite the stability in average scores and the increase in credit originations, delinquencies remain a concern. The report shows higher delinquency rates across all Days Past Due (DPD) categories compared to the previous year, particularly among younger, low-income consumers.
Inflation and Utilization Rates
Inflationary pressures have contributed to a slight rise in balance and utilization rates. As the cost of living increases, more consumers are relying on credit, leading to higher balances and utilization of available credit lines.
Consumer Sentiment and Economic Factors
Susan Fahy, EVP and Chief Digital Officer at VantageScore, expressed caution regarding the current consumer credit landscape. “Despite a healthy average VantageScore credit score and increased originations, we are reaching a potential turning point in consumer credit health,” Fahy said. “The modest increase in consumer delinquencies shows that many consumers continue to struggle. Rising unemployment rates and increased political uncertainty heading into the election season are also weighing on consumers and their financial decisions.”
The report suggests that while banks remain optimistic and continue to extend credit, consumers are feeling the pinch of economic pressures. The combination of rising delinquencies, inflation, and economic uncertainty presents a complex scenario for the future of consumer credit health.
A Positive Outlook?
As the year progresses, the credit market’s trajectory will likely depend on various factors, including employment rates, inflation trends, and political developments. Both lenders and consumers will need to navigate these challenges carefully to maintain financial stability.
Other key insights for June 2024 CreditGauge include:
- Originations across all product categories increased to their highest levels year-to-date. Personal Loans led the jump, increasing 0.22% from 2.68% in May 2024 to 2.90% in June 2024. Consumers in need of credit made use of Personal Loans to help extend their resources as needed. Credit Cards increased from 0.10% from 3.17% in May 2024 to 3.27% in June 2024. Auto Loan originations have been on a steady upward trend in 2024, climbing more than 0.3% year-to-date. New Mortgages rose slightly from 0.27% in May 2024 to 0.28% in June 2024. It is clear that lenders are extending new credit, but consumers are showing signs of increased stress.
- Late-stage delinquencies remained high as consumers struggled to recover from high inflation, elevated interest rates, and other economic pressures. Late-stage delinquencies in the 60-89 DPD category increased 0.08% to 0.35% in June 2024 compared to 0.27% in June 2023. The 90-119 DPD category rose 0.04% year-over-year to 0.15% in June 2024. Overall early-stage delinquencies (30-59 Days Past Due) increased 0.3% to 0.85% in June 2024 compared to June 2023.
- Overall balances and utilization rates inched higher in June 2024 compared to the previous month. In June 2024, overall balances grew 2.2% year-over-year from June 2023 and 0.25% month-over-month from May 2024.
To view the full CreditGauge report, visit the VantageScore website.
