Lenders and borrowers alike are increasingly cautious when considering new loan applications, a strategy that ideally would lead to less bad debt and better borrowing habits. The most recent report from Equifax shows a higher number of borrowers nationwide who are focused on paying down existing debts and only applying for new loans when it makes sense.
The bureau's credit trends data report for November showed a $256 billion annual decline in overall consumer debt during the third quarter of the year. That represented a 2.28 percent year-over-year decrease in overall debt, to $11 trillion. Mortgage debt accounts for more than 75 percent of that total.
Consumers remain focused on paying down this debt, and few are considering new loans. However, some lenders have reported increased application processing activity as of late. According to Equifax, auto bank and auto finance debt climbed 7.1 percent last quarter, particularly in economically strong regions of the ground such as Houston and Dallas.
"Generally speaking, consumers are showing discipline and caution about debt coming out of the recession," said Equifax executive Trey Loughran. "Even though people are taking on debt to get new automobiles, we also know they are driving their cars longer. We expect the trend of the 'disciplined consumer' to continue for some time."
Lenders have shown corresponding discipline by tightening credit restrictions and shoring up weak spots in their application processing systems. Sophisticated credit application software can help in these efforts, providing the framework banks need to establish solid ground benchmarks for qualified borrowers and offering the tools needed to build comprehensive credit scorecards and scoring solutions.