Credit Card Applications Are Soaring to Pre-Pandemic Levels. But Could Inflation Affect Repayment?

Via The Street: "Almost 27% of U.S. consumers said in October that they had applied for a credit card in the past 12 months." ... "Just over 11% of Americans also applied for credit-card limit increases in October, a rebound from about 7% for the same months last year and just below 12% in October 2019, months before the pandemic hit, according to the bank’s [New York Federal Reserve] Center for Microeconomic Data survey." The Experian 2021 State of Credit link is there along with some other interesting statistics. (Average number of credit cards is still 3.)

Inflation could impact repayment for some. If that's the case, we'll no doubt see the average US Fico score drop which will turn against the trend we've recently experienced.

That avg. number of cc's per person (3) will skyrocket once the baby boomers (70, 80, & 90 year olds) are no longer with us. Heck, all the elderly ppl in my life have like 20 bank accts, 200 cd's, but 1 cc.. (Exaggeration not too far off..well yes it is, but they have way more than me except cc's) ....once receiving SS/ retirement, mortgages pd off, more than likely, they don't need credit .....not if they're fishing from the honey hole . (something we may not get to see...SS that is). But yeah, in 10 yrs the avg. I'm betting will be 7 unless something regulates our ability to obtain x amt of cc's in the future.

I don't know that I see the average number of CCs increasing much. I'm surprised by how many 20-somethings I have working for me currently that use debit cards exclusively and don't even have their first CC yet.

Also as someone who has 10 credit cards currently I definitely see myself downsizing with age. My father is in his late 70s and has 3 credit cards (the last one because I twisted his arm to get it) and that's about where I'd want my lineup to sit when I'm his age. I guess my take on it is that history often tends to repeat itself. While I could see the average increasing, I don't see it increasing by much.

We'll just have to grab popcorn and wait a dozen years. I think ppl will need credit more then than now. I don't know that ppl will have ss to "solely" rely on a decade from now...if at all. Ppl will need to work later, will need a plastic boost more in the (not so) Golden years. But once they're (Baby boomers) out of the equation I see a large swing. Only time will tell.

Millennials don't like credit period. We all saw our parents struggle during the Great Recession and many of us older Millennials went bankrupt ourselves. https://www.mybanktracker.com/money-tip ... ard-253500

I think that will change...at least for gen z

Eta: unless govt steps in and takes over our cra's like described in recent articles. Then we may all take a step back.

Veering off topic a little here, but I was just thinking that while age isn't a credit scoring factor, can't age represent increased risk of default? Using my father again as an example, if he is carrying a (say) $5000 balance in his late 70s and I'm carrying the same $5000 balance in my early 40s, all other things being equal wouldn't he have a greater chance of default? Not trying to get all morbid here, just thought this would be an interesting discussion. For a Transactor I would say it doesn't matter, but I'm talking a Revolver here that's always got that $5000 balance cycle to cycle. Eventually I would think a CCC would look at that [trended] data and more or less have to assume they're going to get stuck with that $5000 balance from the elderly person. I don't know what sort of age-related default data there is out there, but since age isn't a credit scoring factor no doubt it can't be used.

Maybe it could be taken into consideration with future algorithms that look at trended data on very old files... something like AoOA of > 40 years, for example so it wouldn't actually be age discrimination.

They'd go after his estate...which is a good gamble with the boomers.

Right, but it would still be a default on the original debt from a credit file perspective.

Creditors are more willing to accept a higher risk of default if they have a higher likelihood of being able to recover the money as well despite the default.

I agree with that.

Just saying that in this example the higher risk of default, which we all seem to agree is the case, doesn't equate to a lower Fico score.

BrutalBodyShots wrote: ↑Tue Dec 07, 2021 5:41 pm Veering off topic a little here, but I was just thinking that while age isn't a credit scoring factor, can't age represent increased risk of default? Using my father again as an example, if he is carrying a (say) $5000 balance in his late 70s and I'm carrying the same $5000 balance in my early 40s, all other things being equal wouldn't he have a greater chance of default? Not trying to get all morbid here, just thought this would be an interesting discussion. For a Transactor I would say it doesn't matter, but I'm talking a Revolver here that's always got that $5000 balance cycle to cycle. Eventually I would think a CCC would look at that [trended] data and more or less have to assume they're going to get stuck with that $5000 balance from the elderly person. I don't know what sort of age-related default data there is out there, but since age isn't a credit scoring factor no doubt it can't be used. Maybe it could be taken into consideration with future algorithms that look at trended data on very old files... something like AoOA of > 40 years, for example so it wouldn't actually be age discrimination.

Whether or not there is any increased risk with higher age of borrower, it's against federal banking regulations to consider older age as a negative factor when making credit decisions as a lender (learned that at work). So unless those regulations change, any algorithm FICO created that 1) scored a consumer's actual age and 2) scored greater age negatively couldn't be used by any FI. Even if it had a lower cutoff age like 40, it would still be considering the age of those, e.g. 70+ as a negative factor compared to those, e.g., 20 and younger.

That's why it couldn't be looked at in terms of the age of the individual. Age of file can (and does) get looked at by algorithms though. The same way a young file is looked at as "worse" by the algorithm due to increased risk by those groups of individuals, couldn't a very old file be viewed similarly in terms of risk assessment?

I'm speaking strictly from a risk of default perspective here. A very young file gets scored accordingly due to increased risk of default, but a very old file that no doubt at some point enters a greater risk of default does not. Just an interesting concept to think about.

Saeren wrote: ↑Tue Dec 07, 2021 3:02 pm Millennials don't like credit period. We all saw our parents struggle during the Great Recession and many of us older Millennials went bankrupt ourselves. https://www.mybanktracker.com/money-tip ... ard-253500

It may not even make a difference in their ability to obtain a mortgage or another high value loan over the next few years. This widespread push to use 'alternative data' for lending/insurance decisions is probably going to make revolving history (with an actual credit card for example) mostly irrelevant in the future. There's millions of data points out there still waiting to be collected for use in analytics. No one really knows what the best indicators of default will be once all that is run through Ai/ML algorithms. For instance: Do sleeping patterns predict default? The only way to tell is by collecting data from phones, smart watches, refrigerators (opened at 2am? lol), when people buy something (Ronco product off TV at 3:30am??), etc., and then analyzing that for correlation with defaults. The correlation will never be perfect, just like with credit score models today, and something like 80+% would be more than good enough to base a decision on.

Crazy to think about what is being compiled on us already that we don't even think about.