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As consumer spending remains healthy, there are signs that some consumers are beginning to experience financial stress. In its February 2024 CreditGauge, VantageScore said delinquencies increased across all credit levels and products, spanning auto loans, credit card debt, mortgages and personal loans.
Early stage delinquencies surpassed 1.0% (to 1.04%) in February, from 0.98% in January. The last time the metric exceeded 1.0% was in February 2020, when it reached 1.07%, the firm said.
However, the average consumer maintained healthy credit, but the number of consumers in the VantageScore Prime credit tier (with credit scores of 661-780) shrank for the second straight month. That level fell 1.1% year-over-year, with the largest moves “up” in the Superprime category (781-850) or “out” in the Subprime level (300-600).
The divergent trends of healthy Superprime consumers, compared to struggling Subprime consumers, “could complicate the Federal Reserve's efforts to effectively engineer a soft landing because VantageScore Superprime consumers are still spending and borrowing, while VantageScore Subprime is finding it increasingly difficult to stay current with their credit.” payments,” said Susan Fahy, executive vice president and chief digital officer at VantageScore.
New account creation and utilization rates declined, perhaps signs that the economy may slow as consumers become more stressed.
In February, new account creation declined across all products except auto loans, which rose modestly for the first time in nearly five months, VantageScore said. Personal loan originations fell the most on a monthly basis, down 0.31%, likely due to tighter credit requirements combined with higher interest rates. Mortgage originations fell for the fifth consecutive month.
Balances remained high overall, up $1,526 year over year, but decreased by $417 in February compared to January. Credit card, mortgage and personal loan balances drove the decline, which could reflect seasonal patterns.
The overall utilization rate fell for the second month, down 0.3% since January 2024. At 52.2%, credit utilization fell to its lowest level since May 2021.
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