Consumers are still being more conscientious in making sure all their bills are paid on time and in full, and therefore making lenders feel better about credit conditions. That will likely lead to expanded lending qualifications over the next six months.
Credit risk professionals believe that consumers' repayment habits will continue to get better over the next six months, and therefore predict that lenders will keep opening new lines of credit to consumers of all stripes, according to the latest quarterly survey from the credit scoring bureau FICO. Lenders predict fewer instances of delinquency across most types of consumer credit, including mortgages, small business loans, car loans and credit cards. Only student loans are expected to tick upwards during this time.
Experts' predictions about credit cards may be of particular interest, as the number of respondents who believe delinquencies for these accounts will rise in the next six months slumped to just 32 percent, the lowest total observed since the second quarter of last year, the report said. That's also down from 39 percent in the previous survey.
"As unemployment falls, even modestly, and four years of deleveraging begin to pay dividends, bankers are allowing themselves to feel some optimism," said Dr. Andrew Jennings, chief analytics officer at FICO and head of FICO Labs. "Of course, we're not out of the woods. Foreclosures continue to put pressure on home prices, and jobs are coming back slowly. But we seem to be headed in the right direction. If we can avoid major bumps in the road, such as a spillover effect from the Eurozone crisis, we should continue to see delinquencies drop."
Because lenders expect to see fewer consumers fall behind on their various payments, they also expect that they'll continue efforts to expand credit offers to more borrowers, the report said. At least half said they expected lending on car loans (77 percent), credit cards (71 percent), student loans (58 percent) and small business loans (52 percent) to broaden in the next six months. However, just 44 percent said they thought their companies' mortgage lending would meet or exceed consumer demand during that time.
Some experts have predicted that delinquencies on credit cards have been improving for so long that they will eventually have nowhere to go but up. Currently, rates of both delinquent and defaulted accounts are well below all-time historic averages.