Equifax Survey Shows Credit Improvement

By Kevin Chiu

Mortgages made to applicants for home purchases and refinancing were down 4% in July from a year ago as weaknesses in job growth Equifax and auto sales took a toll on the economy, according to Equifax Credit Forecast Company. But defaults dropped sharply and other areas of credit extended to consumers, including home equity lines of credit improved for the first time in four years.

The agency said that the decline in mortgages provided to borrowers was likely the result of slower home sales and a weak overall economy. There were $279.7 billion in mortgage originations during the first quarter of the year, a huge decline from the $525.9 billion in loans originated in the last quarter of 2010.

However, in other areas where credit is being extended, Equifax finds the credit cycle has turned with new credit growth. New credit dollars are increasing for auto, bankcard, student loan and home equity lines of credit, according to the company’s latest monthly Credit Trend Report for June. Credit being extended to individuals and families has increased from $209 billion year to date in April 2010 to $240 billion as of April 2011, an increase of almost 15%.

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The figure is substantially, however, below credit extended during the peak of the real estate bubble in 2006 and 2007, but the improvement is a promising sign for the economy and follows four straight years of declines.

“Trouble spots remain,” said Equifax vice president of client services Michael Koukounas. “While many delinquencies have peaked, severely delinquent home finance loans, the shadow inventory remain elevated. Student loan delinquencies and write-off balances have not peaked and continue to increase.”

New consumer loans grew by 3.5% for the year so far, especially showing growth on bank cards and auto loans as the nation’s economy starts to show an improvement in at least some sectors. Equifax’s national analysis is sourced from data on more than 200 million credit files.