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The Wall Street Journal: More U.S. subprime borrowers are missing loan payments


Consumers with low credit scores are falling behind on payments for car loans, personal loans and credit cards, a sign that the healthiest consumer lending environment on record in the U.S. is coming to an end.

The share of subprime credit cards and personal loans that are at least 60 days late is rising faster than normal, according to credit-reporting firm Equifax
 In March, those delinquencies rose month over month for the eighth time in a row, nearing their prepandemic levels. Delinquencies on subprime car loans and leases hit an all-time high in February, based on Equifax’s tracking that goes back to 2007.

Many people, including those with less-than-perfect credit, paid off debts and built up savings during the pandemic, a surprising outcome considering that lenders at first thought borrowers would default en masse when Covid-19 hit. The government’s response, including stimulus payments and child tax credits, boosted many families’ financial health.

But now many of those benefits have run out. Subprime borrowers, who sometimes have lower incomes or less savings, are being hit hard. Inflation, running near its highest point in four decades, is also forcing many households to choose between paying for essentials and paying their monthly loans.

There is also a broader concern among some lenders about the ability of consumers overall to keep up with payments when some of their financial benefits taper off., including excess savings that they accrued during the early stages of the pandemic. Wells Fargo

Chief Executive Charlie Scharf said Tuesday that higher prices for food and gasoline will constrain U.S. households.

Some 11% of general-purpose credit cards held by consumers with credit scores below 620 were at least 60 days behind on payment in March compared with 9.8% a year prior, according to the latest data available from Equifax. Personal loans and lines of credit delinquencies came in at 11.3%, up from 10.4% a year prior. Both categories hit Covid-19-era lows of 7.5% and 8.3%, respectively, in July.

Car loan and lease delinquencies hit a record in February, based on Equifax’s tracking, with 8.8% of subprime accounts behind on payment by at least 60 days. That edged down to 8.5% in March but was still the second highest level on record.

Fewer people are in subprime credit-score brackets than when the pandemic began. Some 18.6% of U.S. adults with credit scores had a score lower than 600 in 2020, compared with 15.5% last year, according to Fair Isaac Corp. , creator of FICO scores.

An expanded version of this story appears on

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