Credit card delinquency rates hit new high

The Federal Reserve Bank of Philadelphia last week released its 2023 Q4 Insights Report, finding that credit card delinquency rates hit decade-plus highs in the fourth quarter.

Details: Almost 3.5% of total card balances were at least 30 days past due at the end of December, the highest since 2012 and more than double the number from 2021.

• The percentage of card balances at least 60 and 90 days past due also increased.

• Over a third of consumers pay their balance in full each month, but the share of consumers making minimum payments rose to just over 10% of cardholders, a new high.

• And credit scores have dropped. Per Bloomberg, “Credit scores at the 10th and 25th percentiles of cardholders decreased to their lowest levels since the first quarter of 2020.”

Why it’s happening: To keep it simple, consumers are battling historically high inflation and interest rates. 

For contractors: The credit score drops raise a question: Will consumer financing approvals decline this year? 

• We asked several contractors nationwide and got mixed responses, with most expecting approvals to be flat. “We have actually seen an uptick in financing applications… [But] we are seeing a lot more counteroffers and denials from [our lender].”

• “My current thinking is we’ll see approval rates flat to down low-single-digits this year, barring no huge macro shifts.”

• “Not seen much of an increase in declines yet… [The] issue will be people holding off [on] doing anything.”

Looking ahead: Q1’s report — which will show how cardholders are doing this year — is due soon after this quarter.

• Have you noticed a drop in financing approvals recently? Let us know.