I maintain a strong FICO score on my personal credit. I leave some credit cards open even if I don’t use them to bulk up my available credit, and to keep the age of my open credit to be measured in decades. Good FICO scores help keep the cost of credit down and I can even see an impact on my auto insurance. The downside is that I get lots of solicitations, including what seems to be almost daily mail drops by Marcus, Goldman Sachs’ consumer lending arm..
Some of those mailings will likely drop in 2019 as Bloomberg reports a reduction in lending goals.
- Goldman Sachs Group Inc. is looking to restrain the rapid expansion of its online lending platform as the firm grows more cautious on the consumer debt market that’s a key area of growth.
- The firm’s Marcus unit cut its loan-originations target for next year, according to people with knowledge of the plans. The revision reflects concern about the stage of the credit cycle and changes in market data, the people said, asking not to be identified as the information isn’t public.
Mercator Advisory has been forecasting the credit slowdown all year and will be carrying this through in the upcoming 2019 Mercator Advisory Group Credit Outlook. But, personal loans are still hot as the credit card market is saturated.
- Personal loans have surged to a record and are the fastest-growing U.S. consumer-lending category, according to data from credit bureau TransUnion. Outstanding balances stand at about $125 billion. And a lot of that growth is coming from fintech companies, which originated more than a third of total personal loans in 2017 compared with less than 1 percent in 2010.
- The loss rate on the Marcus loan portfolio was around 5 percent, CFO Marty Chavez said on the most recent quarterly earnings call in July.
- Goldman Sachs Chairman Lloyd Blankfein laid out a case for the bank’s caution at an event in June: If customers can’t pay unsecured loans, the firm eats the loss. There’s no home to repossess.
Goldman is taking advantage of rapid credit growth, which creates the need for debt consolidation when consumers realize the sticker-shock of excessive spending. Our expectation is the cycle will continue and we will soon see Goldman playing directly in the credit card space as we said in this recent Viewpoint.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group