This a second look at some interesting charts from the New York Fed Quarterly Report on Household Debt and Credit.

Over 10 Percent of Credit Card Debt is Seriously Delinquent

Serious Delinquency for Auto Loans by Age

Serious Delinquency for Credit Cards by Age

Lenders Took More Risk

The Consumer Financial Protection Bureau (CFPB) reports Credit Card Delinquencies are Higher than in 2019 Because Lenders Took on More Risk.

After falling during the pandemic, the share of consumers with a delinquent credit card has increased rapidly since 2021 and is now higher than in 2019. While consumers with delinquencies clearly show signs of struggling, news reports have taken the rising delinquency rate as a sign that financial distress is becoming more widespread, suggesting underlying weakness in the U.S. economy. We show that rather than being a sign of broader distress, this increase in delinquencies is explained by a substantial increase in the riskiness of recently issued credit cards.

Delinquencies have been concentrated among credit cards originated in the last few years and we show these credits cards were much riskier than in previous years. Two factors explain this extra risk: First, lending standards loosened a bit in 2021 and 2022 judging by a decline in credit scores at origination. At the same time, pandemic aid and forced savings pushed average credit scores up sharply. Effectively, by not tightening significantly, lenders were originating cards much further down the risk spectrum. We show this shifting risk composition explains why delinquencies are higher than in 2019.