Home / Credit News / Fewer late payments as borrowers increase debt

Consumers are still feeling good about their finances thanks to a number of improving economic factors, and as a result are both taking on new credit and making more on-time payments.

Consumer credit on non-mortgage accounts rose on a year-over-year basis in the month of June, climbing to $2.43 trillion, up more than $70 billion from the same period in 2011, according to the latest National Consumer Credit Trends Report issued monthly by the credit reporting bureau Equifax. The latest level was a high not seen in 28 months, and was largely driven by an increase in borrowing on new accounts so far this year.

In all, the amount of money issued for new accounts' credit limits has risen 14 percent and roughly $30 billion between April 2011 and the same month in 2012, rising to $248 billion from $218 billion, the report said. Much of that came from auto lending, as the total amount of financing issued on these loans totaled $134.3 billion between the beginning of the year and April.

That was the second-largest amount for that period seen in the last seven years, with only 2006's January-to-April total of $137.3 billion exceeding it, the report said. In all, outstanding car financing balances stood at $745 billion through the end of June, up more than $46 billion from the $699 billion seen in the same month last year.

The total amount of non-revolving consumer debt, which includes auto and education financing, as well as other loans, climbed to $1.84 trillion in June, the largest total in five years, the report said. That beat out October 2008's previous high of $1.82 trillion.

But at the same time, revolving debt on retailer- and bank-issued cards rose only slightly, climbing $3 billion to $585 billion in June, the report said. May's total was the lowest seen since the recession began. Now, balances on these cards have slipped 22 percent - $167 billion - from the peak in October 2008.

Meanwhile, late payments on both bank-issued cards and auto financing slipped once again during the month, and both now stand at just more than 3 percent, the report said. These are the lowest totals observed in the last five years.

"The trends we're seeing in consumer lending are directly related to overall economic conditions," said Equifax chief economist Amy Crews Cutts. "Households are in better financial condition today, with income, assets and liabilities more in balance, but labor markets are still a weak spot. This explains the slow but steady rise in demand for new credit, steady utilization rates and declining delinquency rates across all tradelines."

Experts have noted that expanding consumer credit qualifications on a number of types of financing will likely lead to more instances of delinquency in the near future, and that current rates are unsustainably low. A move back to historical norms has been expected for some time, but not yet taken place.