VantageScore's CreditGauge Suggests Trouble May Be Ahead for Subprime Borrowers as Delinquencies Rise

But Credit Originations Rise as Lenders Tap High Credit Score Borrowers

SAN FRANCISCO, May 31, 2023 /PRNewswire/ -- A small portion of the consumer population in the subprime credit tier is increasingly struggling to make on-time payments according to the April CreditGauge analysis examining the key drivers of consumer credit health. The rise in delinquencies stands in contrast to a significant new increase in credit originations across all credit products as lenders increasingly tap into Prime borrowers.

In a more positive development, the overall average VantageScore credit score rose modestly to 702. Enticed by high overall consumer credit scores and positive economic conditions for consumers, lenders unexpectedly increased their issuance of credit in a variety of credit products including credit cards.

"The American consumer remains resilient, but we are seeing those with lower credit scores miss payments more frequently," said Susan Fahy, Executive Vice President and Chief Digital Officer at VantageScore. "The slowdown in the economy and higher cost of goods has impacted them to a much greater extent than consumers with higher scores who are more actively seeking and getting approved for new loans." 

SUBPRIME UNDER PRESSURE BUT SHRINKING: Overall delinquencies rose compared to a year ago with the most significant increase in the 30 days past due Subprime category recording a 20% increase year-over-year. The overall proportion of consumers in the lowest Subprime credit tier continues to decline and stands at 17.9% in April 2023. 

NEW CREDIT ACCOUNTS INCREASE, CREDIT CARD ISSUANCE RISES: Credit originations rose in April across all products. Personal loans rose the highest month-over-month followed by credit card, auto loan and mortgages, respectively. Credit card issuance rose for the second consecutive month in April, indicating that lenders remain willing to lend to credit worthy consumers. 

AVERAGE BALANCES AND UTILIZATION REMAIN FLAT: Year-over-year balances have remained up, with an increase of 5.6% in April to $5,457. Higher prices and interest rates continued to factor into increased consumer spending. On a month-to-month basis, however, overall balances and the utilization rate remained flat, indicating that consumers are cautious and still spending on essential services.

To view the full CreditGauge report, visit the VantageScore website.

About CreditGauge Powered by VantageScore

CreditGauge is provided both as a monthly report to industry stakeholders, as well as through a series of interactive tools at VantageScore.com. Stakeholders can use the tools to execute additional queries on credit metrics and compare current levels to a pre-pandemic timeframe, starting with January 2020. CreditGauge provides critical insights including the Average VantageScore^® credit score, as well as key consumer credit metrics that underpin the VantageScore^® credit scoring model such as delinquencies, balance-to-loan ratios, and new account openings. Consumer credit trends are provided at a national level as well as by generation, and loan types (credit card, personal loans, auto loans and mortgages). CreditGauge represents the views and opinions of VantageScore and does not necessarily reflect or represent the views and opinions of its affiliates and owners, including the Nationwide Credit Reporting Agencies (NCRAs)-- Equifax, Experian, and TransUnion.

About VantageScore

VantageScore develops consumer credit scoring models that combine the need for both financial inclusivity and dependable predictiveness across all scoring ranges. Known as an industry thought leader, the company's most recent models score approximately 96 percent of all adults 18 and older – including 33 million more people than conventional models – without sacrificing safety and soundness. As a result, lenders using VantageScore can extend credit to those who have been historically marginalized, including minority and lower-to-middle income Americans. VantageScore credit scores are used by thousands of lenders, landlords, utility companies, telecom companies, and many others to determine creditworthiness. Additionally, tens of millions of consumers rely on free access to their VantageScore credit scores to monitor their own creditworthiness.

VantageScore was launched in 2006 and is owned by America's three NCRAs – Equifax, Experian, and TransUnion. Using a patent-protected tri-bureau methodology, VantageScore delivers time-tested, innovative, and more consistent credit scoring models across all three NCRAs.

For more information, visit www.vantagescore.com

SOURCE VantageScore