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Consumer Credit Defaults Up for Third Straight Month

The number of consumer credit defaults continues to rise, according to new data through January 2020 from…

  • March 17, 2020

The number of consumer credit defaults continues to rise, according to new data through January 2020 from S&P Dow Jones Indices and Experian.

The data informs the S&P/Experian Consumer Credit Default Indices. The indices represent a comprehensive measure of changes in consumer credit defaults and show that the composite rate rose six basis points to 1.02%.

According to the report, the bank card default rate increased 33 basis points to 3.28%. The auto loan default rate dropped three basis points to 0.99% and the first mortgage default rate rose four basis points to 0.84%.

Four of the five major metropolitan statistical areas showed higher default rates compared to last month. 

Dallas showed the largest increase, up nine basis points to 1.07%. Chicago rose eight basis points to 1.17%, Miami was seven basis points higher at 1.77%, and Los Angeles was up six basis points to 0.86%. New York was the only MSA that decreased, down two basis points to 1.07%.

Defaults are still happening at a low level, so there’s no need to panic. When defaults rise sharply it’s an indication that consumers are maxed out on credit, and/or that the economy is weakening. At such times lenders can pull back a bit. Consumers may find it more difficult to qualify for financing. They may also be charged higher interest on common forms of credit.

Again, we’re not there yet. There are some headwinds in the economy, though, and consumers would be wise to take heed of recent developments. In other words, if you have been planning to take on a “big ticket” loan (such as a mortgage, home refinancing or auto loan), now might be a good time to make your move.

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