"You can get a bit of a canary in a coal mine effect. While the delinquency rates are not yet a cause for concern, "it's definitely something to watch," Tavares said. Credit card delinquency rates are now back to their pre-pandemic levels for young people and non-prime borrowers, the data showed. Among non-prime borrowers, the percentage of credit card and auto loans that were more than 30 days past due also rose, VantageScore found. Rapidly accelerating prices could exacerbate financial strains among young people and borrowers with low credit scores, Tavares said. Those surging prices are causing consumers to cut back on discretionary spending, according to retail and consumer companies like Walmart Inc and Tide-maker Procter & Gamble Co, which lowered sales growth forecasts over the past week. consumer spending grew at its slowest pace in two years, as the economy unexpectedly contracted in the second quarter. Number one among them is consumers are adding leverage."Federal Reserve Chairman Jerome Powell has said the clock is running out to bring down inflation, which is hovering at levels not seen since the 1980s.ĭata out on Thursday showed U.S. "The consumer is strong, their balance sheets are strong, and their repayment history on debt is strong relative to historical averages," Tavares said. That contrasts with consumers' tendencies to pay off loans and be more frugal during the first year of the pandemic, according to Fed data. Bank executives have consistently said consumers have healthy financial cushions and are spending money despite high inflation and the slowing economy.Now there are signs that some Americans have overextended their finances from traveling and dining out while paying down less debt on their credit cards, said Silvio Tavares, president and CEO of VantageScore. consumers, their bank accounts padded by government stimulus, student loan forbearance and pandemic-era savings. Balances for non-prime borrowers, or people with credit scores below 660, rose by nearly 25% over the same period.įor months, things have been looking good for U.S. credit files compiled by credit score company VantageScore. Generation Z consumers and those with low credit scores are falling behind on credit card and auto loan bills and accumulating credit card debt at a pace not seen since before the pandemic.įor instance, credit card balances for people ages 25 and younger rose by 30% in the second quarter from a year earlier, compared with an increase of just 11% among the broader population, according to a random sampling of 12.5 million U.S. NEW YORK (Reuters) - As high inflation forces Americans to spend more on gas and bills, young and low-income consumers are starting to feel financial pressure.
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