Consumers have been accumulating high levels of consumer debt, signaling weakening in personal finances, according to VantageScore's August 2024 CreditGauge, a monthly analysis highlighting the overall health of U.S. consumer credit.
The average VantageScore 4.0 credit score remained at 702, but inched closer to its first decline in over a year. The lowest VantageScore 4.0 credit score is 300, while the highest score is 850.
The report said that borrowers leaned more heavily on credit as loan balances hit their highest level in more than four years.
“Last week’s rate cut came just in time for many borrowers who may have seen their personal finances weaken over the last two years,” said Susan Fahy, executive vice president and chief digital officer at VantageScore. “Unfortunately, many of these same borrowers now face the end of the student loan ‘on-ramp,’ adding additional expenses to juggle and prioritize."
Overall loan balances rose to the highest level in more than four years. August 2024 saw average balances rise by $1,811 year over year compared to August 2023 and $353 month over month compared to July 2024.
"These coinciding September events will impact millions of Americans’ credit scores – either positively or negatively – in the months ahead,” Fahy added.
In August 2024, average credit card balances hit a record $6,358, up 4.5% from last year. Auto loan and mortgage balances also increased, while personal loan balances remained steady. The balance-to-loan ratio slightly rose to 51.7%, reflecting back-to-school spending. Credit card utilization increased to 31.04% from 30.81% in July, highlighting greater reliance on credit for expenses.
Month-over-month, originations rose across all products except mortgages. The percentage of newly opened accounts on file rose across auto loans, credit cards, and personal loan products, while the mortgage category remained unchanged at 0.28%.
Year over year, originations increased for personal loans and auto loans and decreased for credit cards and mortgages in August 2024 compared to August 2023.
