Through the end of July, both consumers and lenders shifted to a more cautious credit posture, per VantageScore's July 2024 CreditGauge, a monthly analysis highlighting the overall health of U.S. consumer credit.
While the average consumer remains credit healthy with an average VantageScore 4.0 credit score of 702, consumers became more credit cautious overall and reduced credit utilization to 51.6%, hitting a four-year low. Overall loan balances and the amount of available credit used both fell in July 2024 compared to June 2024. Balances fell moderately by an average of $147.
Lenders also reduced new credit loan growth compared to July 2023 for all categories of credit products. 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.
"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 Executive Vice President and Chief Digital Officer at VantageScore, Susan Fahy. "We are seeing the impact of sustained high interest rates, which are clearly cooling lending activity."
The percentage of newly opened credit accounts fell across all loan products in July 2024 compared to July 2023. Originations also fell compared to the prior month except for mortgages, which remained flat, indicating growing financial strain among consumers. This, coupled with the impact of sustained high interest rates, points to a cooling trend in lending activity, with both borrowers and lenders becoming more risk-averse.
New auto loans decreased by 0.19%, the highest month-over-month decline among all products. New auto loan originations also fell among Gen Z consumers by 0.3% in July 2024 compared to June 2024, the biggest one-month drop across generation groups. The decrease in originations was driven by substantially more cautious consumer borrowing and simultaneously increased risk perception by lenders.
In July 2024, delinquencies rose across all Days Past Due (DPD) categories compared to June 2024 and July 2023. Auto loan delinquencies saw the largest year-over-year increase at 0.20%, followed by Mortgage delinquencies at 0.17%. Delinquency rates increased across all VantageScore credit tiers except Superprime, reflecting the worsening employment environment impacting consumers' ability to stay current on credit obligations.
