Fewer credit delinquencies reflect strengthening economy

More people are paying off their debts in a timely manner, according to information released by the American Bankers Association for the fourth quarter. Closed-end loan delinquencies fell across the board, while bank card delinquencies showed significant decline as well.

For the first time since early 2012, delinquencies fell in all eight closed-end loan categories, including personal and auto loans. The ABA report defines a delinquency as a late payment that is 30 days or more overdue.

“It’s rare to see delinquencies fall in nearly every category, and the levels continue to be very low by historical standards,” said James Chessen, ABA’s chief economist. “The steady creation of new jobs has been essential to keeping delinquencies low, and we’ve seen more than 10 million jobs filled in the past four years.  Greater job stability and increased take home pay have allowed consumers to make more purchases while keeping balances low relative to their income.”

Direct auto loan delinquencies fell to 1.07 percent from 1.12 percent; home equity loan delinquencies fell to 1.78 percent from 1.84 percent; marine loan delinquencies fell to 0.76 percent from 0.94 percent; mobile home delinquencies fell to 4.48 percent from 4.97 percent, and RV loan delinquencies fell to 0.73 percent from 0.96 percent.

In the open-end credit category, bank card delinquencies fell to 2.46 percent from 2.62 percent. These rates are well under the 15-year average of 3.6 percent. Delinquencies on home equity lines of credit and non-card revolving loans, however, increased.

Chessen believes delinquencies will hover at very low levels for the foreseeable future as the economy continues to gain momentum and consumers remain financially disciplined.

“Tax reform has put more money in Americans’ paychecks, which makes it a little easier for them to meet their obligations each month,” Chessen said. “Consumers have done a remarkable job of managing their finances over the last several years, and we expect that will continue as the growing economy reinforces their financial footing.”

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