Consumer Loan

Delinquencies Set
to Rise:
Good News or Bad News?

% of respondents expecting new delinquencies on all consumer loans to increase

% of respondents expecting credit card delinquencies to increase
% of respondents expecting auto loan delinquencies to increase

60%

Delinquencies
Ready for Take Off
FICOs quarterly survey of
North American bank risk
professionals found expectations
for delinquencies on credit
cards and auto loans, and
for new delinquencies on all
consumer loans, to be at their
highest levels since Q4 2011.
Thats definitely bad news. Or
maybeits good news.

50%
40%
30%
20%
10%
0%
Q2
10

Q3
10

Q4
10

Q1
11

Q2
11

Q3
11

Q4
11

Q1
12

Q2
12

Q3
12

Q4
12

Q1
13

Q2
13

Q3
13

Q4
13

Q1
14

2014 Fair Isaac Corporation. All rights reserved.

% of respondents expecting
delinquencies to increase

50%

40%

30%

20%

10%

0%
Credit Cards

Auto Loans

All Consumer Loans

Pessimism
(and Optimism)
Is in the Eye of
the Beholder
In the Q1 2014 survey, 44%
of respondents expected
delinquencies on credit cards
to increase during the next
six months, while 35% said
delinquencies on auto loans
would increase. Some 43%
expected new delinquencies on
all consumer loans to increase.

2014 Fair Isaac Corporation. All rights reserved.

Trending Now
This is the fourth consecutive
quarter in which expectations
for delinquencies on credit cards
and auto loans have grown.

50%

40%

30%

20%

% of respondents expecting delinquencies on

credit cards to increase

10%

% of respondents expecting delinquencies on

auto loans to increase

0%
Q1 13

Q2 13

Q3 13

Q4 13

Q1 14

2014 Fair Isaac Corporation. All rights reserved.

Credit Spigot
Is Opening
The glass-is-half-full crowd
interprets this trend as a healthy
sign after lenders spent much
of the time from 2008-2013
constricting credit availability
and avoiding risk. These survey
results mean more people are
gaining access to credit. That, in
turn, can lead to more spending,
more jobs, more growth.

2014 Fair Isaac Corporation. All rights reserved.

The Sky Is About

to Fall, Maybe!
The folks in the glass-is-halfempty camp will be quick to say
we need to keep an eye on risk.
If actual delinquencies reach
an uncomfortable level, then
lenders may need to pull back.
We saw that movie a few years
ago, and it was a horror flick.

2014 Fair Isaac Corporation. All rights reserved.

66.5%
% of US consumers with
FICO Scores of 650850
66.0%

65.5%

65.0%

64.5%

Time to Take
a Deep Breath
Of course, there is some validity
to both views. Banks always
need to keep an eye on credit
risk. But with card delinquency
levels at record lows and US
credit quality approaching prerecession levels, we are probably
not in any imminent danger.

64.0%
Oct
2008

Oct
2009

Oct
2010

Oct
2011

Oct
2012

Oct
2013

2014 Fair Isaac Corporation. All rights reserved.

Shop Til They

Drop

70%
60%

Interestingly, the survey found

that bankers expect consumer
re-leveraging to continue and
perhaps accelerate. In the survey,
65% of bankers expected
average balances on credit
cards to increase over the
next six monthsthe highest
percentage in the surveys
four-year history.

50%
40%

Percentage of respondents expecting

balances to increase

30%

Percentage of respondents expecting

balances to decrease

20%
10%
0%
Q3
10

Q4
10

Q1
11

Q2
11

Q3
11

Q4
11

Q1
12

Q2
12

Q3
12

Q4
12

Q1
13

Q2
13

Q3
13

Q4
13

Q1
14

Is that good news or bad

news?

2014 Fair Isaac Corporation. All rights reserved.

Learn more:
Read our Insights white papers on
analytics and decision management.
Check out our blogs:
FICO Labs Blog
Banking Analytics Blog

For more information

www.fico.com

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2014 Fair Isaac Corporation. All rights reserved.
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