With foreclosures and unemployment rates up, how are loan delinquencies down?
There is a significant difference between how people think of the credit crisis and how they react with their finances. Loan delinquencies trended upward in 2009, but they've peaked for the majority of loan types-auto loans, credit cards, HELOCs, and even mortgages. Student loan delinquencies have not peaked and are still increasing.
Typically, increases in the dollar delinquency rate (the number of loans with delinquent payments divided by the number of loans) were influenced by increases in both incidence and average size of delinquencies. The size of the delinquency speaks to the financial stress and higher degree of leverage of some consumers.
Consumer debt has been decreasing for almost two years. How? Consumers are decreasing their financial leverage voluntarily (by paying down debt) and involuntarily (by not paying), and lenders are extending credit more selectively. During the recession, consumer delinquency and derogatory behavior increased, which explains part of debt reduction.
However, not all consumers experienced material adverse financial stress (delinquencies, write-offs). There is evidence that these consumers became more conservative in their financial behaviors, including how they manage debt.
For more information, check out today's Equifax personal finance blog by Equifax credit experts at http://credit.equifax.com/2010/10/what-do-credit-and-debt-statistics-mean.html