VantageScore, a leading national credit-scoring company, has officially announced the launch of 2024 CreditGauge, which happens to be a monthly analysis highlighting the overall health of U.S. consumer credit. Going by the provided word, through the end of July, both consumers and lenders shifted to a more cautious credit posture. This was evident in the fact that, even though average consumer remains credit healthy with an average VantageScore 4.0 credit score of 702, overall population became much more credit cautious and reduced their credit utilization to 51.6%, hitting a four-year low. On the other hand, lenders also reduced new credit loan growth compared to July 2023 for all categories of credit products. They did so largely because early-stage consumer credit delinquencies (30-59 Days Past Due) rose the most in more than four years as the weaker employment environment negatively impacted consumer payments on recent loans. Having referred to the initial bits and bobs, we now must talk about the whole report on a slightly deeper level, beginning from declining credit originations across all instruments. In essence, the report informs us on that percentage of newly opened credit accounts went down across all loan products in July 2024 compared to July 2023. These originations also fell compared to the prior month except for Mortgages, which remained flat. To go along with that, even new auto loans decreased by 0.19%, the highest month-over-month decline among all products. Almost like an extension of it, new auto loan originations also fell among Gen Z consumers by 0.3% in July 2024, as compared to June 2024. This was, by far, the biggest one-month drop across generation groups.
“Some new warning signs emerged in July, including higher delinquencies and lower originations. Both lenders and consumers are becoming more credit cautious as many consumers de-leveraged and reduced credit utilization,” said Susan Fahy, Executive Vice President and Chief Digital Officer at VantageScore. “We are seeing the impact of sustained high interest rates, which are clearly cooling lending activity.”
Moving on, like we briefly touched upon, the VantageScore report also revealed that overall loan balances and the amount of available credit used both fell in July 2024 compared to June 2024. Here, balances fell moderately by an average of $147 and the credit utilization rate dropped by 0.2% month-over-month to 51.6%. Markedly enough, while credit origination and utilization hopped on a downwards trend, late payments would rise on a broader level. You see, total delinquencies in July 2024 rose across all DPD categories, when compared to both June 2024 and July 2023. Breaking it down, in the 30-59 DPD category, Auto Loan delinquencies experienced the largest year-over-year increase, rising by 0.20%. This was closely followed by Mortgage delinquencies, which increased by 0.17% over the same period. Among other things, we ought to mention how delinquency rates climbed up year-over-year across all VantageScore credit tiers except Superprime.
As for VantageScore CreditGauge™, it is delivered at the reader’s disposal both as a monthly analysis to industry stakeholders, an analysis which presented through interactive tools available on VantageScore.com. These tools include Inclusion360®, RiskRatio®, and MarketGain®. Hence, stakeholders can leverage the same to execute more queries on credit metrics and compare current levels to a pre-pandemic timeframe. VantageScore, on its part, has also been the fastest-growing credit scoring company in U.S. In fact, during 2023, usage of VantageScore increased by 42% to more than 27 billion credit scores. At present, well over 3,400 institutions, including 8 of the top 10 banks, use VantageScore credit scores to provide consumer credit products, including credit cards, auto loans, personal loans and mortgages. Giving the company’s credit scores even greater importance is the fact that its VantageScore 4.0 credit scoring model scores 33 million more people than traditional models. Beyond that, FHFA has now also mandated the use of VantageScore 4.0 for Fannie Mae and Freddie Mac guaranteed mortgages, empowering the company to make a name for itself in mortgage lending.
