Feb 04, 2013 Philip Burgess
A rebounding jobs and housing market may have spurred Americans to accumulate more credit over the past few months, and a recent PRMIA and FICO survey indicated that the new year could consist of more of the same. According to Andrew Jennings, chief analytics officer at FICO, consumers "may again be willing to fund their lifestyles by taking on more debt."
"These results indicate that 2013 could be the year that Americans begin to embrace credit again, after the considerable deleveraging we've seen since 2008," Jennings said. "And it appears that banks are willing to oblige."
The study revealed that 61 percent of bank risk professionals believe credit line requests will rise over the next six months, while 59 percent of respondents expect consumer credit card debt to grow. Both have been high-water marks since FICO and PRMIA began conducting the poll nearly three years ago. At the same time, the poll found that bank risk managers anticipate 71 percent of credit card requests will be accepted during the first half of 2013.
An earlier report by the Federal Reserve revealed that consumer credit grew a seasonally adjusted annual rate of 7 percent in November, jumping to approximately $2.77 trillion total. Revolving debt, which includes credit card spending, increased 1.1 percent during that time period.
Banks lending again for many reasons
November's positive American consumer credit report was spurred primarily by the rise in non-revolving debt, the sector that consists of auto and student loans.
"Consumers are replacing cars that have been on road for too long ... and are taking loans on education that they hope will pay off in the future," said Patrick O'Keefe, director of economic research at CohnReznick.
According to the Federal Reserve statistics, revolving debt grew 9.6 percent in November. Meanwhile, the FICO and PRMIA survey suggested that short term lending by banks should remain strong with regard to car and student loans during the first half of 2013. Nearly three-quarters of respondents said they expect auto loan demands to be met, and 68 percent said they anticipate the same for student borrowing.
Small business lending also continues to bounce back, with more than half of bank risk professionals claiming they believe such loan requests will be accepted over the next six months. A separate study by Biz2Credit found that small banks approved half of small business loans in December 2012, while big banks pushed through 14.9 percent of requests, a 5.2 percent year-over-year increase.