Filomena Scalise

Johannesburg - Consumers' ability to pay off credit obligations remained weak in the first quarter of the year, TransUnion said on Tuesday.

“Two years of deteriorating credit health has placed South Africa's consumer credit market under considerable strain, causing lenders to become more judicious in their lending practices,” company chief executive Geoffrey Miller said in a statement.

The organisation records credit health according to an index in which a score above 50 indicates an improvement in the ability of consumers to pay back debt, while a score below 50 indicates a deterioration.

The index rose in the first quarter of this year to 49.4 compared to the last quarter of 2013, where it was 48.9.

In the first three months of 2013, the score was 45.1.

Miller said the upward trend was “encouraging” but largely represented “more of a stabilisation amid relatively weak consumer credit conditions rather than an outright improvement”.

The number of consumer accounts three months or more in arrears had dropped by 1.8 percent compared to last year.

“While there are still millions of consumers between three to nine months in arrears, or already written off, under judgment, or in debt counselling, the current trend is welcome news after the surge in new defaults in 2012 and 2013”, said Miller.

However, households were still experiencing strained finances and there was a rising use of credit cards to supplement household budgets.

“Budgets clearly remain under considerable pressure and are vulnerable to higher consumer inflation and worsening employment conditions.” - Sapa