As U.S. consumers’ credit health remained robust late last year, there are faint hints of a brewing storm in the financial realm. VantageScore’s findings suggest that managing debt obligations is becoming increasingly arduous, fuelled by inflationary pressures and soaring borrowing costs.

VantageScore’s data unfurled the distressing reality that a plethora of credit consumers perched on the lower rungs were financially taut towards the end of 2023. Millions sought refuge in personal loans or petitioned lenders for augmented credit card limits to navigate through expenses and holiday splurges. Unsurprisingly, this has jolted concerns about their ability to meet ensuing monthly payments.

The November report witnessed an upsurge in delinquencies year-on-year across all loan categories. The Days Past Due (DPD) climbed to .90% from .68% (30-59 DPD), to .33% from .23% (60-89 DPD), and to .15% from .10% (90-119 DPD). The sole exception to this disconcerting surge was observed in VantageScore’s Superprime segment, nestled within the 60-89 DPD category.

“There is a growing concern that some consumers’ holiday spending is adding unsustainable levels of credit card and personal loan debt,” remarked Susan Fahy, executive vice president and chief digital officer at VantageScore.

The lamentable findings didn’t cease there. Early-stage personal loan delinquencies leaped to .99% from .87% a month prior, marking the second instance in 2023 when delinquencies in this category surpassed pre-pandemic levels. Additionally, credit card balances ballooned by 9% from November 2022. “Consumers seemed to exude assurance during the festive shopping season, and the impact on balances is palpable, especially with credit card interest rates scaling historical peaks amid the Federal Reserve’s tightening cycle,” VantageScore accentuated in its November CreditGauge report.

The reversion to normalcy in consumer credit aligns with the resumption of student loan payments, marking the culmination of one of the final remnants of pandemic-era fiscal cushioning for consumers. When leading credit card issuers ((COF), (AXP), (JPM), (SYF), (DFS), (BFH), (BAC)) disclosed their November metrics, they illuminated a grim reality where delinquency and net charge-off rates surged on average. Certain entities, such as Capital One Financial, bore witness to weakened credit quality compared to the pre-pandemic era.

Lenders, in general, are poised to vigilantly monitor consumers’ spending patterns as persistent inflation continues to exert pressure on purchase behaviors. Even when the Fed initiates rate cuts – an event anticipated in 2024 – credit card companies are unlikely to lower rates if consumers habitually rely on credit cards for expenditures. This, undoubtedly, leaves consumers grappling with the arduous endeavor of chipping away at their balances.

SA’s Quant system bestowed Capital One (COF) with the highest rating among consumer finance stocks, trailed by PROG Holdings (PRG), Synchrony Financial (SYF), MoneyLion (ML), and OppFi (OPFI).