The rate at which consumers were significantly past due on their credit card accounts slipped in the first quarter of the year to a low, and the average amount owed on all accounts declined as well, even as more borrowers obtained new cards.
The credit card industry continued to move in a positive direction across two metrics in the first quarter of 2012 when compared to the last three-month period of 2011, according to the latest statistics from the credit bureau TransUnion. The greatest improvements were seen in severe credit card delinquencies and the amount of debt carried per borrower, which both reversed negative trends observed in the two previous quarters.
Credit card delinquency, the term TransUnion applies to accounts 90 days or more without payments, slipped to just 0.73 percent of all balances in the first quarter, down from 0.78 percent in the final three months of 2011, the report said. Both levels were, however, well below historical norms.
Further, the amount of debt carried by borrowers on average slipped after two straight quarters of increases, falling $242 to a total of $4,962 on a quarter-over-quarter basis, the report said. And while this figure is still appreciably higher than the average observed in the first quarter last year ($4,679, the lowest since 2007), it was also well below the high of $5,776 from the first quarter of 2009.
"After two consecutive quarters of increases in both the delinquency rate and average debt, it is encouraging to see a return to declines in delinquency," said Ezra Becker, vice president of research and consulting in TransUnion's financial services business unit. "This contributed positively to a general trend since the bottom of the recession, which saw delinquency rates remain at near-record lows. Trends in average debt year over year suggest that little more than the usual seasonal influence is behind these changes."
However, Becker also noted that the first quarter is historically not one in which significant increases are ever noticed in these statistics, the report said. Therefore, the downward trend may not be significant enough to imply that there won't be a deviation from standard seasonal fluctuations either.
Consumers continued to open new accounts
At the same time as consumers were being more cautious with their credit card repayments, more also increased the number of cards they carried, the report said. In all, the total number of new accounts opened throughout 2011 increased by more than 20 percent over 2010's total, driven by a 21.8 percent increase in lending to subprime borrowers. However, that type of lending growth actually fell from a 24.2 percent increase in 2010.
Consumers opening new credit cards should first check their credit reports to ensure that they do not have any unfair markings on the documents dragging their credit standings down. Oftentimes, working with a credit repair company can help to clear up any troublesome entries.