Risk management software that offers comprehensive credit application processing capabilities can be the tool lenders need to better evaluate potential credit applicants and improve the quality of origination operations. A new report suggests many more businesses might be reticent to lend credit to new consumers, driving a drop in the nation's consumer credit levels.
The Federal Reserve released data September 10 that examined the nation's consumer credit position in July 2012, reporting that the annual rate of outstanding credit debt declined by 1.5 percent. Outstanding credit debt was reportedly $2.7 trillion in July, down more than $3 billion from the previous month's level.
The level of revolving debt dropped by 6.8 percent, which experts say may be an indication that shaky economic confidence is preventing consumers from submitting applications for credit cards and other types of loans. July's decrease followed a 4.5 percent decline in revolving debt reported in June.
According to Reuters, Credit Suisse analysts speculated that consumers and banks alike are cautious to approach new financial extensions – with most Americans focused on paying down existing debts and most banks carefully scrutinizing new credit applications.
"It may be the case that consumers and lenders were becoming more tentative over the summer," said Credit Suisse analysts, according to Reuters.
Cautious lending may be wise given the volatility of the national and global economy, though banks should take care to keep their eyes open to certain advantageous financial opportunities. By managing operations with intuitive credit application software that offers insight into credit risks and potential, lenders can leverage this knowledge to tweak strategy and improve decisioning.