Consumers Are More Likely to Pay Bankcard Debt Before Mortgage Debt

Study results represent a significant departure from historical pattern of paying mortgage debt before bankcard debt

COSTA MESA, Calif., June 20 /PRNewswire/ — According to the latest Experian study on the subprime lending market, subprime consumers — those with an Experian credit score of 620 or lower — are more likely to be 30 days or more late on their mortgage payments than on their unsecured bankcard obligations. As consumers have historically paid mortgage debt over bankcard debt, this finding represents a significant departure from conventional behavior.
Consumers with credit scores considered to be "prime" — above 680 — continued to follow traditional historical patterns of paying mortgage debt before bankcard debt.

"The current marketplace debate and increased visibility on subprime lending led us to examine historical consumer payment trends to see if they have shifted," said Kerry Williams, president, Experian Information Solutions group. "Interestingly, our data revealed that many consumers in the subprime segment have adjusted their payment patterns in order to better manage their personal finances."

    Other key findings:

    *  The mortgage delinquency rate for subprime consumers has grown at
       13.2 percent over the past four years

    *  The Western region experienced the sharpest growth in delinquencies —
       15.3 percent for mortgage versus 6.4 percent for bankcard

    *  The same delinquency pattern is present across each geographic region
       in the United States

    *  Between 2005 and 2006, outstanding mortgage balances for subprime
       consumers increased 8.8 percent, while total outstanding mortgage
       balances grew only by 3.3 percent

    *  Over the past four years, bankcard lending to subprime consumers has
       risen by 137 percent, and mortgage lending to subprime consumers grew
       by 58 percent during the same time period

"Although the environment has changed, the subprime consumer lending segment still remains viable," said Williams. "However, it is prudent for lenders to explore improvements in decisioning process and tools to counter recent market trends."

The data analysis was conducted using Experian’s Portfolio Benchmarking and Trend Analysis(SM), a sophisticated portfolio management tool that tracks and analyzes changes in consumer credit activity and other marketplace metrics. Companies can utilize this intelligence to assess current conditions, analyze trends and benchmark against competitors for strategic portfolio management decisions.

Leave a Reply

Your email address will not be published. Required fields are marked *