As a follow up to our recent research on U.S. credit trends, the FICO Labs team has looked at how debt has changed for “delinquent” customers – defined here as people who are 60+ days behind on any one credit account – and the rest of the population. Our analysis shows that, while late payers owe less on average, the amounts owed have risen in the last five years, at a time when the rest of the U.S. population has been deleveraging.
In fact, the average debt held by consumers who are behind in their debt repayments rose 17 percent between 2007 and 2012. The mean total debt for consumers who were 60+ days delinquent on at least one account grew from $53,706 (adjusted for inflation) in October 2007 to $62,642 in October 2012, fuelled largely by student loan debt and mortgage debt.
We reported last year on the rise in student loan debt, and our new analysis shows more cause for concern. Student loan debt was the fastest-rising component for delinquent consumers, rising 89 percent since 2007. The mean student loan debt also rose 58 percent for the rest of the population, and was the only type of credit to rise for these consumers. For delinquent consumers, the amount owed on student loans in October 2012 was also 66 percent higher than for non-delinquent consumers in the same time period.
Mean mortgage loan debt was 14 percent higher in 2012 for delinquent consumers, whereas it fell by 22 percent for non-delinquent consumers. An even greater discrepancy occurs for all other credit (not including student loans, credit cards, mortgages or auto loans): the average debt rose 61 percent among delinquent consumers, whereas it fell by 28 percent among non-delinquent consumers.
This data reveals a disturbing trend. Most people owe less across the board (except for in student loan debt). However, collectors are dealing with people who probably owe more than the late payers did a few years back. That makes it more challenging to collect, and to help debt-troubled Americans get back on track. Collectors should look at more tailored strategies and online payment plans.
FICO Labs reviewed 10 million depersonalized U.S. consumer credit bureau records for this analysis. About 19 percent of the population were 60+ days delinquent in each sample. For clarity’s sake, let me point out that the two snapshots of data, October 2007 and October 2012, were not matched. That is, the individuals who were 60+ days behind as of October 2007 are not all the same individuals who were 60+ days delinquent as of October 2012. What we are showing here is trends in debt loads, not trends for a specific cohort of individuals.