Giving second chances to consumers with credit profiles previously tainted with foreclosures and short sales is paying off.
Foreclosures, short sales and bankruptcies will fall off the credit files of 2.5 million consumers between June 2016 and June 2017. More than two-thirds of those consumers now have a credit score in the near-prime, prime or superprime tiers, Experian said last month.
Those homeowners who short sold between 2007 and 2010 and have since opened a new mortgage loan are making auto loan payments on time. Their average 60-day delinquency rate is 1.2 percent, compared with the 2.2 percent national average.
Consumers who foreclosed between 2007 and 2010 and opened new mortgage loans are also making payments on their auto loans. Their average delinquency rate was also below the national average at 1.9 percent.
The shift goes to show that the auto lending market is healthy. The average auto loan balance per consumer was $18,361 in the third quarter, the highest level since the third quarter of 2009, according to TransUnion’s Q3 Industry Insights Report.
Loan amounts are at record highs since 2009 because more consumers have become creditworthy enough to take advantage of them. Their credit profiles are improving as the post-recession economy recovers. The industry and economy run in cycles, so who knows what the future holds. But at least for now, consumers who suffered a few years ago will have another deserved chance.