Consumer Credit Grows but Some Risks Lurk

According to the Federal Reserve Board, consumer credit grew by a seasonally adjusted annual rate of 7.9 percent over the month of November to $3.75 trillion. Revolving credit, which is largely composed of credit cards, grew by 13.5 percent while non-revolving credit, typically student loans and auto loans, rose by 5.9 percent.

Although revolving credit grew faster than non-revolving credit in November, since the end of the recession growth in non-revolving credit, both student and auto loans, has accounted for much of the increase in overall consumer credit. In November, non-revolving credit reached $2.76 trillion, accounting for 73.5 percent of consumer credit while the $992 billion in outstanding revolving credit accounts for 26.5 percent.

However, consumers’ ability to service the major components of non-revolving debt, student and auto loans, has come into question. An earlier post showed that the proportion of student loan debt outstanding that is 90 or more days past due has been growing consistently since at least 2003. The share 90 or more days past due remains especially elevated in recent years though the upward trend has abated.

Similarly, consumers’ ability to service auto loans also poses some concern. The share of auto loans 90 or more days delinquent followed a similar cycle as mortgages, credit cards, and HELOCs, peaking in response to the recession and then beginning to decline. However, in recent years the share of auto loans 90 or more days past due has also flattened. Analysis by the NY Fed found that the flow of auto loans into the 90 or more days past due category has generally stagnated for most households with a credit score above 620. However, for subprime borrowers, those with a credit score below 620, the flow of auto loans into “serious” delinquency has begun to rise noticeably.



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