Subprime Consumers More Likely to Pay Bankcard Debt Before Mortgage Debt

Consumers with credit scores considered to be "prime" -- above 680 -- continued to follow traditional historical patterns of paying mortgage debt before bankcard debt.

"The current marketplace debate and increased visibility on subprime lending led us to examine historical consumer payment trends to see if they have shifted," said Kerry Williams, president, Experian Information Solutions group. "Interestingly, our data revealed that many consumers in the subprime segment have adjusted their payment patterns in order to better manage their personal finances."

Other key findings:

• The mortgage delinquency rate for subprime consumers has grown at 13.2 percent over the past four years
• The Western region experienced the sharpest growth in delinquencies -- 15.3 percent for mortgage versus 6.4 percent for bankcard
• The same delinquency pattern is present across each geographic region in the United States
• Between 2005 and 2006, outstanding mortgage balances for subprime consumers increased 8.8 percent, while total outstanding mortgage balances grew only by 3.3 percent
• Over the past four years, bankcard lending to subprime consumers has risen by 137 percent, and mortgage lending to subprime consumers grew by 58 percent during the same time period

"Although the environment has changed, the subprime consumer lending segment still remains viable," said Williams. "However, it is prudent for lenders to explore improvements in decisioning process and tools to counter recent market trends."

The data analysis was conducted using Experian's Portfolio Benchmarking and Trend Analysis(SM), a sophisticated portfolio management tool that tracks and analyzes changes in consumer credit activity and other marketplace metrics. Companies can utilize this intelligence to assess current conditions, analyze trends and benchmark against competitors for strategic portfolio management decisions.

For more information about the Experian study, including a graphical representation of the data, please call Susan Henson at 714 830 5129 or e-mail her at susan.henson@experian.com.