Delinquent auto loans taking toll on credit scores

09.22.09
By Lewis Green

People may be making more progress paying down their credit debts, but this doesn't mean they aren't continuing to inflict damage on their credit scores.

A recent example comes from Experian, which found that the number of automobile loans more than 60 days past due rose 21.2 percent between the second quarter of this year and the same time in 2008.

Overall, 0.80 percent of all automobile loans were 60 days past due as of the second quarter, compared to 0.66 percent in the second quarter of 2008. When factoring in 30-day delinquencies, a total of $25.5 billion in vehicle loans are said to be at risk.

The number of 30-day automobile loan delinquencies was up by 14.6 percent on a year over year basis, while the number of loans for used vehicles increased by about 5 percent during that same time period.

"As the recession continued to drag on during the second quarter, the rate of delinquency rose much faster from the first to second quarter than it did the previous year. This caused lenders to tighten criteria and push some consumers out of the new vehicle market," said Scott Waldron of Experian Automotive.

A look at recent Federal Reserve statistics shows that Americans have been paying off their non-revolving debts, which includes auto loans. At the end of July, consumers owed about $1.56 trillion in non-revolving debt. That figure reached its peak in the second quarter of 2008 at $1.6 trillion, just as the recession was getting underway.

Despite the lower debt figures for Americans, one point of disagreement among some economists is whether this shows that people are more disciplined about their personal finances, or whether lenders have simply continued to demand higher credit scores from consumers.

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The recession has more Americans falling behind on auto loans as well as credit cards.