The latest consumer credit index (CCI) released by Transunion on Tuesday shows that the appreciation of the rand, low food inflation and stable interest rates have been positive for consumer confidence.
The survey, released on a quarterly basis, measures borrowing and repayment activity of consumers and monitors their use of credit such as with store accounts and credit cards.
Transunion notes that its measure of accounts in three-months arrears in the last quarter of 2017 fell to 53.4 from 5.7 in the third quarter. It says this is indicative of the decrease in distressed borrowing and excessive use of credit and store cards by consumers.
The index remains above 50 which reflects good credit health as lower scores reflect worsening credit health, mainly characterised by an increase in defaults of new accounts.
Although the latest CCI score indicates an ongoing gradual improvement in consumer credit health, Transunion’s Stephen de Blanche warns that consumers are not in the clear.
“Real household income growth remains weak, the job market is not very strong, and now households will face a raft of new tax increases from the start of the second quarter, including on VAT and the fuel levy”.
“While we are somewhat encouraged by the trend in the CCI since 2016, now is no time for complacency in the industry,” de Blanche added.
He said that although payment trends on arrears on accounts that are more than three months behind may have fallen since 2016, the total value of those outstanding accounts has however risen.
“Credit providers should pay special attention to this.”