Loan delinquencies expected to drop

The rate at which consumers fall behind on their various bills, including credit card debt, is expected to continue falling throughout the next six months, and lenders say they will likely continue broadening credit standards as a consequence.
The latest quarterly survey of banking professionals found that lenders are expecting nationwide credit conditions to keep expanding during the next six months, according to a report from the credit scoring bureau FICO. In all, 65 percent expect mortgage loan delinquencies to slip or hold steady during that time, and 72 percent believe the same will be true for small business loans. Meanwhile, delinquent payment on auto loans and credit cards, which have in recent months hit near-record lows, are expected to stay more or less the same. These are all improvements from the previous survey, conducted at the end of last year.

Further, only 32 percent of those polled actually said they thought credit card delinquencies would increase, down from 39 percent in the previous survey, the report said. That's also the lowest figure observed since the second quarter of last year. At the same time though, slightly more than half of respondents said they expected student loan delinquencies to tick up. However, that is still down from 67 percent last quarter.

"As unemployment falls, even modestly, and four years of deleveraging begin to pay dividends, bankers are allowing themselves to feel some optimism," said Dr. Andrew Jennings, chief analytics officer at FICO and head of FICO Labs. "Of course, we're not out of the woods. Foreclosures continue to put pressure on home prices, and jobs are coming back slowly. But we seem to be headed in the right direction. If we can avoid major bumps in the road, such as a spillover effect from the Eurozone crisis, we should continue to see delinquencies drop."

Lending to keep expanding

As a consequence of all this positive outlook, a larger number of lenders said they will continue to make credit more available to consumers, the report said. The majority of respondents said their credit offerings would either meet or exceed demand, with 77 percent of respondents saying they would have enough car loan offers available to consumers, and 71 percent responding similarly about credit cards. Smaller numbers, but still more than half, also felt the same way about small business loans and student lending.

At the same time, however, the housing market seems a point of concern for lenders, the report said. In all, 56 percent of respondents said they did not think their credit supply would meet demand for residential mortgages.

Consumers who want to ensure they get the best line of credit available should consider checking their credit reports. Doing so may help them identify potentially unfair markings that can have an adverse effect on their credit rating. Working with a credit repair company can help to clear them up.