TransUnion Finds Auto Loan and Credit Cards Paid Before Mortgage

In 2011, consumers with at least one open bankcard, auto loan, and mortgage are more likely to try and stay current on their car payment then keep up with their monthly house payment or credit card bills, according to a ""TransUnion"":http://www.transunion.com/corporate/personal/marketing/truecredit.page?channel=paid&cid=ppc:google:transunion&gclid=CI6az6rqjK8CFehgTAod0DOIFA study.

[IMAGE]

Consumers have also been more likely to pay for their credit cards before their mortgages for four consecutive years, according to the study.

""The reversal in payment patterns between credit cards and mortgages has been well documented, but our findings were illuminating because it had not been previously clear that auto loans were considered a higher priority by consumers than both credit cards and mortgages,"" said Ezra Becker, VP of research and consulting in TransUnion's financial services business unit.

The TransUnion analysis looked at a sample of approximately 4 million consumers in each quarter of 2011 and found that 39.1 percent were delinquent on a mortgage while current on their auto loans and credit cards. Additionally, 17.3 percent were delinquent on a credit card while current on their auto loans and mortgages, and 9.5 percent were delinquent on an auto loan while current on their credit cards and mortgages.

Becker said, ""A few reasons why auto loans have become the preferred payment to make include the need for an auto to get to work or look for employment, and the fact that an auto loan is not a revolving loan - the impact of repossession is greater than the loss of a credit card.""

[COLUMN_BREAK]

Becker also added that consumers may have equity in their cars after several years of payments, which is not the case with homes right now.

While the hierarchy is consistent across states, variations do exist between states depending on regional economics and consumer preferences.

On the state-level, 50 percent of consumers in Florida were 30 or more days delinquent on their mortgage while current on credit cards and auto payments, whereas in Texas, the figure was 34.4 percent.

Also, in Florida, 6.1 percent of consumers were 30 days or more delinquent on their auto loans, but current on their credit card and mortgage payments, and in Michigan, the figure was also low at 7.3 percent; in Texas, the percentage of those delinquent on their auto loan but current on their mortgage was more than double at 15 percent.

""This preference for prioritizing auto loans before credit cards and mortgages was seen in all 50 states and the District of Columbia through 2011,"" said Becker. ""However, the preference for paying auto loans was more pronounced in states like Florida and Michigan, which have seen severe drops in house prices and may have strong consumer affinities for autos, and less pronounced in states like Texas, where house prices have declined less.""

The reversal in trends where more consumers paid their credit cards before their mortgages first occurred in the first quarter of 2008.

Matt Komos, a co-author of the study and TransUnion consultant, said, ""It appears that the shift back to prioritizing mortgage payments ahead of credit cards - or auto loans - may only occur once the housing market has stabilized and begins its recovery and the unemployment situation shows significant improvement. Until that time, based on the last four years of data, it would seem that the current payment patterns will remain status quo.""