As the economy improves and the credit landscape changes, the number of consumers with access to credit has also grown. From Q3 2014 to Q3 2015, the number of consumers in the market who were granted a revolving line of credit increased by approximately six million, as indicated in the chart below. This is an incredible surge in a short amount of time that could translate to growth and new portfolio opportunities when proactively addressed.
With more consumers gaining access to credit, lenders should regularly review loan portfolios to better understand the trajectory of all accounts to create optimal risk strategies. Identifying portfolio trends grants the ability to cater to customers who might be eligible for a credit line increase or other applicable offers.
Examining the dynamics of growth
TransUnion’s 2015 Industry Insights Report detailed a steady decline in average revolving balances since 2010, with total average balances falling over $4,000 in five years. There has also been a stable debt level on non– revolving balances, with the average balance per consumer decreasing from over $125,000 to below $115,000 in that same time frame. However, as average personal income and consumer confidence have increased, personal consumption has benefited. With the confluence of higher consumer optimism on borrowing and improved credit performance, the volume of consumer credit balances grew for mortgage, auto, credit card and consumer loans, as indicated in the chart above.
To date, delinquencies are stable for credit cards and personal loans, but still decreasing for mortgage, and have been at consistently low levels for the last five years in auto. Some sectors have recovered faster than others, and auto is one of them. The most recent figures available reveal nearly 7.5 million new auto loan accounts in Q2 of 2015, an increase of approximately 500,000 new auto loans from Q2 of 2014. Even taking seasonality into account with auto finance lending, we see there has been steady growth year over year. From a consumer level perspective, the 2015 Industry Insights Report detailed the number of consumers with an auto loan balance increased steadily year over year since Q3 of 2013. Between Q3 2014 and Q3 2015 alone, the total number of consumers with an auto loan balance increased by approximately 8%.
The new financial and credit environment requires adapting to changes in the market with a more competitive portfolio management strategy. The data points noted above provide insight into how many people are taking on debt and the kind of debt. How well-positioned are you to accommodate the credit needs of your customers?