Amid positive performance data, new accounts show increase in delinquencies
LONDON—June 12, 2014—FICO (NYSE:FICO), a leading predictive analytics and decision management software company, today released its quarterly UK cards data showing that the number of UK cards with overlimit balances has hit the lowest point in more than two years.
Data from the FICO® Benchmark Reporting Service shows that the percentage of standard credit cards with overlimit balances has fallen from 2.6 percent in March 2012 to 1.9 percent in March 2014. The percentage of cards with overlimit balances also dropped for student, premium and Irish cards, with student cards falling the furthest, from 5.3 percent in March 2012 to just 2.4 percent in 2014, a 55 percent drop.
“Some of this change could be accounted for by the increase in average credit lines, which have risen over the last year by 4.6 percent,” said Stacey West, a Fair Isaac® Advisors business consultant who works with UK card issuers. “However, the reduction in overlimit accounts is outpacing the increase in credit lines. People became more cautious with their credit cards during the economic crisis, and they are maintaining their good habits.”
The reduction in overlimit accounts was observed among all vintages of card accounts. However, new accounts now make up a higher percentage of all overlimit accounts: 3.5 percent in March 2014, compared with 2.2 percent in March 2013, a rise of nearly 60 percent.
“Our analysis also shows that the percentage of new accounts that are 30 or 60 days delinquent has increased,” West reported. “More accounts opened within the last year are going delinquent, although they have smaller balances. Issuers should ensure that new accounts are given appropriate initial limits, should monitor risk and usage metrics, and should have targeted collections strategies in place. The industry standard approach is to assign specific collection treatments to accounts open six months or less, but we recommend issuers also pay special attention to accounts open six months to a year.”
About FICO® Benchmark Reporting Service
The card performance figures are part of the data shared with subscribers of the FICO® Benchmark Reporting Service, which compares overall market performance in the UK cards market with individual card issuers’ performance. The data sample studied represents 26 million accounts, or about half of all credit cards issued in the UK, and comes from client reports generated by the FICO® TRIAD® Customer Manager solution in use by most UK card issuers.
Card issuers that subscribe to the FICO Benchmark Reporting Service receive a quarterly review of their portfolio compared to the industry, with 24 months’ worth of data. For greater insight, subscribers can explore the data by vintage of accounts. For information on the FICO Benchmark Reporting Service, contact Stacey West at email@example.com.
FICO (NYSE: FICO) is a leading analytics software company, helping businesses in 90+ countries make better decisions that drive higher levels of growth, profitability and customer satisfaction. The company’s groundbreaking use of Big Data and mathematical algorithms to predict consumer behavior has transformed entire industries. FICO provides analytics software and tools used across multiple industries to manage risk, fight fraud, build more profitable customer relationships, optimize operations and meet strict government regulations. Many of our products reach industry-wide adoption. These include the FICO® Score, the standard measure of consumer credit risk in the United States. FICO solutions leverage open-source standards and cloud computing to maximize flexibility, speed deployment and reduce costs. The company also helps millions of people manage their personal credit health. FICO: Make every decision count™.
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