Credit Where It’s Due by Alison Rich

If it were a game of limbo, July would be the winner. That month, the composite default rate reached the biggest low it’s experienced in 12 months—down 18 basis points to 3.31 percent—according to the S&P/Experian Consumer Credit Default Indices.

The indices show that the composite rate leapt one basis point from the prior month to 0.83 percent. Auto loan defaults, on the other hand, increased by four basis points to 0.86 percent. The first-mortgage default rate gained two basis points from June to 0.62 percent.

Default rates tanked in three of the five major cities in July. New York saw the largest decrease, down six basis points from June to 0.82 percent. Los Angeles came in at 0.63 percent for July, losing three basis points from June. Chicago rounded out the trio at 0.9 percent, down one basis point from June. Dallas, however, increased 10 basis points from the previous month to 0.77 percent. Miami totaled 1.23 percent for July, up six basis points from June.

Although the national bank card default rate did indeed experience its biggest low in 12 months, the rate remains high. After setting a recent low at 2.49 percent in December 2015, it has zigzagged upward before July’s decline. It’s 3.31 percent now. The composite, auto, and first-mortgage default numbers all sit close to their July 2016 levels.

“Default rates for autos and first-mortgage loans are at their lowest points in the last 10 years, while bank card defaults remain modest,” said David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “Consumers’ use of credit is growing and the level of consumer credit outstanding is at an all-time high.”

In the year ending June 2017, consumer credit outstanding hit 5.7 percent, outstripping most spending categories economy-wide. Conversely, retail sales excluding autos as well as auto sales are down a pinch since April, while home sales haven’t budged much in recent months.

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