Blog Posts Process Analysis

UK Cards: Signs of Debt Stress in Accounts 1-5 Years Old

Blog: Enterprise Decision Management Blog

Credit Cards

December 2017 saw the highest levels since at least 2002 for average total sales (merchandise and cash) and average credit lines on UK Classic credit cards. In reviewing our data from the FICO Benchmarking Service, for users of FICO TRIAD Customer Manager, I saw some interesting long-term trends and some signs of potential debt stress, particularly among accounts 1-5 years on book.

Card Patterns Since 2002

Comparing 2017 with 2002 yields some instructive findings:

Delinquency Trends

When reviewing delinquency levels looking back to 2002,  we can see they are noticeably below those seen during the last economic downturn; however, this still reveals areas of potential concern.

Chart showing delinquency trends for UK cards on books 1-5 years

Warning Signals

More recent data shows further deterioration trends and signs of debt stress at the vintage level.

There could be several reasons for this deterioration in the 1-5 years on book subpopulation, besides their higher limits. These include higher-risk accounts being accepted for a card over a year ago; consumers taking up 0% offers, not paying off the balance in the offer period and facing more interest than they can afford on expiry; or a general downturn in the market.  This subpopulation accounts for about 26% of the benchmarking pool, a substantial amount.

The January to March editions of the FICO Benchmarking Service data will reveal if the higher spend seen in December can be maintained by consumers or if there was a higher-than-normal rise in delinquency levels at the start of the year, indicating debt stress. Issuers are advised to closely monitor results and focus collections activities on the high-risk, high-balance accounts. Analysis will show whether collections based on time on book would be appropriate.

In my next post, I’ll discuss how some options for card issuers based on our data and the FCA’s focus on persistent debt.

The post UK Cards: Signs of Debt Stress in Accounts 1-5 Years Old appeared first on FICO.

Leave a Comment

Get the BPI Web Feed

Using the HTML code below, you can display this Business Process Incubator page content with the current filter and sorting inside your web site for FREE.

Copy/Paste this code in your website html code:

<iframe src="" frameborder="0" scrolling="auto" width="100%" height="700">

Customizing your BPI Web Feed

You can click on the Get the BPI Web Feed link on any of our page to create the best possible feed for your site. Here are a few tips to customize your BPI Web Feed.

Customizing the Content Filter
On any page, you can add filter criteria using the MORE FILTERS interface:

Customizing the Content Filter

Customizing the Content Sorting
Clicking on the sorting options will also change the way your BPI Web Feed will be ordered on your site:

Get the BPI Web Feed

Some integration examples