Consumer Access to Credit Cards Grows to Highest Level since 2005 as Mix of Card Issuers Changes
TransUnion report reveals consumer credit scores have risen and the mortgage market is recovering at a faster pace than anticipated
The number of consumers with access to a credit card at the end of Q1 2017 reached the highest level since 2005, according to TransUnion’s (NYSE:TRU) Q1 2017 Industry Insights Report. The report, powered by PramaSM analytics, was released today at Card Forum, a leading conference for card and payment executives.
In Q1 2017, over 171 million consumers had access to a bankcard, the highest level TransUnion has observed since 2005. Of these, 16.33 million were subprime consumers, an additional 2.32 million consumers from just two years prior in the first quarter of 2015. The growth rate for subprime consumers was 8.9% in Q1, twice the rate of an average of 2.6% for all other risk tiers. The growth in access contributed to a 7.4% increase in total bankcard balances, which reached $693 billion in Q1 2017.
Number of Consumers with Access to a Bankcard Continues to Rise
|
Q1 2005 |
Q1 2010 |
Q1 2015 |
Q1 2017 |
|
162.49 million |
149.59 million |
160.61 million |
171.38 million |
“The card market went through a transformation after the recession as more lenders opened up access to subprime and near prime consumers. The competition for super prime consumers has become fierce, and we are seeing it manifest in higher total credit lines.”
With a focus on affluent programs, average total credit lines have increased for super prime consumers. The average total credit line for super prime consumers rose from $29,176 in Q1 2010 to $33,371 in the first quarter of 2017. At the same time, lenders have decreased total credit lines extended to consumers at the other end of the credit spectrum.
“Lenders have taken a cautious approach to re-entering subprime card lending by keeping credit lines lower,” added Siegfried. “The recent surge in subprime cards has contributed to an increase in the card delinquency rate at the start of the year, but from a pre-recession, historical perspective, we are still at low levels of delinquency.”
Average Total Credit Lines Rise for Super Prime Consumersas Lenders Compete for Least Risky Group
Risk Tier | Change in Average Credit Linesince Q1 2010 |
Super prime | +$4,195 |
Prime plus | +$146 |
Prime | ($967) |
Near prime | ($651) |
Subprime | ($1,069) |
Though the subprime card market has grown, consumer credit scores have improved over time, and consumers have become more credit-active across major products. In Q1 2017, 58% of consumers had a VantageScore® 3.0 risk score of prime or better, up from 57% of consumers in 2016. In the same quarter in 2010, just 51% of consumers were prime or better.
“While a one percent increase of consumers in the prime or better risk tiers may seem insignificant, it actually represents millions of consumers. Strong economic fundamentals have enabled more consumers to have access to credit while maintaining relatively low delinquency levels. Recent increases in the card and auto delinquency rates are worth monitoring, but overall, the credit market is performing well."
The 90-day+ consumer-level credit card delinquency rate increased from 1.50% in Q1 2016 to 1.69% in Q1 2017. This is elevated from the Q1 delinquency average of 1.51% observed between 2013 and 2017 and has been anticipated since subprime access began expanding in 2014.
Trends in the Credit Card Market
Credit Card Metric | Q1 2017 | Q1 2016 | Q1 2015 | Q1 2014 |
Delinquency Rate (90+ DPD) Per Borrower | 1.69% | 1.50% | 1.34% | 1.50% |
Average Debt Per Borrower | $5,332 | $5,193 | $5,144 | $5,162 |
Prior Quarter Originations* | 16.00 million | 16.71 million | 14.52 million | 13.53 million |
*Note: Originations are viewed one quarter in arrears to account for reporting lag.
In 2010, just 55 lenders issued more than 10,000 originations annually, but this number rose to 86 issuers by the end of 2016. The top 10 bankcard issuers have seen their share of the market decline from 87% of card balances in 2010 to 81% of balances in 2017.
Mortgage Originations Grew to Highest Levels since 2012
The mortgage delinquency rate declined 11.9% at the beginning of the year, dropping to 2.07% in Q1 2017 from 2.35% in Q1 2016. The mortgage delinquency rate has continued its steady decline for 15 straight quarters.
“Over the last three quarters, we observed a leveling out of the mortgage delinquency rate, which suggests we may be approaching a natural floor for delinquencies. But the significant drop observed this quarter puts us at a level we did not expect to reach until the third quarter. This is a positive sign for the industry, indicating we are recovering at a faster pace than expected. It may also suggest opportunities to cautiously and prudently extend access to low risk borrowers.”
At the end of 2016, mortgage originations, viewed one quarter in arrears, grew to 2.08 million, the highest fourth quarter level since 2012. Originations grew 28.6%, up from 1.62 million in the fourth quarter of 2015. The majority of originations (85.6%) were to consumers in the prime or better risk tiers, with the largest concentration of borrowers in the super prime risk tier (32.7%).
“At the end of the year, only 14.4% of originations were to nonprime consumers,” said Mellman. “As the market stabilizes, mortgage lenders are well-positioned to take advantage of trended and alternative data to better evaluate the riskiness of nonprime consumers.”
Trends in the Mortgage Market
Mortgage Lending Metric | Q1 2017 | Q1 2016 | Q1 2015 | Q1 2014 |
Delinquency Rate (60+ DPD) per Borrower | 2.07% | 2.35% | 3.06% | 4.10% |
Average Debt Per Borrower | $196,772 | $191,927 | $187,153 | $188,628 |
Prior Quarter Originations* | 2.08 million | 1.62 million | 1.42 million | 1.37 million |
*Note: Originations are viewed one quarter in arrears to account for reporting lag.
Auto Delinquency Ticks Up as Lenders Pull Back on Subprime Originations
The latest Industry Insights Report found that auto loan balances continued to grow at a more moderate pace in the first quarter of 2017. Total auto balances reached $1.12 trillion, up from $1.05 trillion in Q1 2016. The year-over-year growth rate in Q1 2017 was 7.3%, the lowest level TransUnion has observed since Q2 2012.
The average auto balance per consumer rose to $18,386, up 1.8% from $18,065. The auto loan delinquency rate increased from 1.16% in Q1 2016 to 1.30% in Q1 2017, driven by poorer loan performance in the subprime and near prime segments.
“Serious auto loan delinquency rates are approaching levels not seen since the recession, but it’s important to understand that delinquencies in the auto market never elevated to levels observed for other key credit products such as credit cards and mortgages. Regardless, with flatter sales volumes and higher delinquencies, we anticipate lenders will evaluate their credit policies for subprime and near prime borrowers to calibrate for the uptick in delinquencies.”
Auto originations, viewed one quarter in arrears, declined to 6.66 million to end 2016, down 0.2% relative to Q4 2015. This marks the second consecutive quarter in which total originations were down year over year. Subprime originations had the steepest decline in originations, declining 5%.
Trends in the Auto Market
Auto Lending Metric | Q1 2017 | Q1 2016 | Q1 2015 | Q1 2014 |
Delinquency Rate (60+ DPD) Per Borrower | 1.30% | 1.16% | 1.02% | 1.10% |
Average Debt Per Borrower | $18,386 | $18,065 | $17,512 | $16,894 |
Prior Quarter Originations* | 6.66 million | 6.67 million | 6.32 million | 5.88 million |
*Note: Originations are viewed one quarter in arrears to account for reporting lag.
Personal Loan Balances Grow While Subprime Originations Slow
The total balance for unsecured personal loans grew 9.7% to $102 billion in Q1 2017. One year prior, personal loan balances were $93 million. The year-over-year growth rate slowed compared to prior first quarters, when the yearly growth rate averaged 19.9% between 2013 and 2016.
The average personal loan balance was $7,603 in the first quarter, a slight increase from $7,544 in Q1 2016. In the last five years, personal loan balances have grown by $1,709 from $5,893 in Q1 2012.
“Personal loan balances have increased rapidly in the last five years, but we observed a slowdown in the growth of both total balances and average balances in the first quarter. While the first quarter is usually lighter volume for personal loans, as consumers use tax returns or bonuses for purchases and to pay down debts, the beginning of 2017 experienced a larger than normal decline.”
At the end of 2016, personal loan originations, viewed one quarter in arrears, declined 10.8% from 4.10 million in Q1 2016 to 3.66 million in Q1 2017. Subprime (down 12.6%) and near prime (down 13.5%) originations experienced the sharpest year-over-year drops in originations.
The personal loan delinquency rate also ticked up slightly to open 2017. The delinquency rate was 3.72%, a 3.6% increase from 3.59%.
Trends in the Unsecured Personal Loan Market
Unsecured Personal Loan Metric | Q1 2017 | Q1 2016 | Q1 2015 | Q1 2014 |
Delinquency Rate (60+ DPD) Per Borrower | 3.72% | 3.59% | 3.62% | 3.95% |
Average Debt Per Borrower | $7,603 | $7,544 | $6,876 | $6,315 |
Prior Quarter Originations* | 3.66 million | 4.10 million | 3.85 million | 3.27 million |
*Note: Originations are viewed one quarter in arrears to account for reporting lag.
Please visit http://www.transunioninsights.com/IIR for more charts and details about TransUnion’s Q1 2017 Industry Insights Report or register for TransUnion's Q1 2017 Industry Insights Webinar.
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