Sliding auto delinquencies another sign of improving consumer credit

More Americans are staying current on their auto loan payments, keeping their credit scores intact and providing another sign that the economy is improving.

According to data released by the credit bureau TransUnion, the national auto loan delinquency rate, which accounts for all accounts that are 60 or more days past due, reached its lowest level since the company began tracking such data in 1999.

The firm says just 0.36 percent of accounts were delinquent in the first quarter of this year, which represents a decline from the previous year’s figures of nearly 27 percent. Compared to the previous quarter, rates were down nearly 22 percent.

“Auto loan delinquencies continue to perform exceptionally. This can be attributed primarily to growing demand for both new and used vehicles and higher used vehicle values, which equates to an increase in equity for consumers,” said Peter Turek, automotive vice president in TransUnion’s financial services business unit.

Turek also added that the current performance of auto loans is extremely positive, and that it shouldn’t necessarily be seen as a negative sign for the economy if one of the next reports shows a slight increase in delinquencies compared to this historic low. That is because lenders continue to approve more loans to borrowers without prime credit scores.

Mortgages also showing gains

The improvement evident in auto loans has also been seen in mortgages. Data released by the Mortgage Bankers Association last week found that the number of consumers falling behind on their home loans had also dropped. The overall rate fell 18 basis points from data seen in the fourth quarter, reaching a ratio of 7.40 percent of all loans. That percentage also revealed a 92 basis point decrease from the situation seen by mortgage lenders a year earlier.

The MBA added that its serious delinquency rate, which shows the number of borrowers behind by at least 90 days, also slipped. In contrast, the percent of loans in the foreclosure process showed a slight increase as processing backlogs worked through the system.

While consumers have become better at paying off their loans and avoiding the negative credit score impact that goes along with the delinquency, unfair marks placed on their credit reports may still be having a significant impact. It’s recommended that consumers review their reports regularly.

Posted in Lending
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