The average credit score for Americans rose to 696 last month, the highest in the last four years, according to Equifax Inc., a consumer-credit data provider.  Federal Reserve data suggests that delinquencies have dropped 30 percent in two years as well.  Pair those statistics with the fact that the ratio of consumer-debt payments to incomes is the lowest in 17 years and all signs point to a loan rebound across the country.

“The financial situation of the household sector has improved far faster and far more than everyone thought it would two years ago,” said James Paulsen, chief investment strategist for Wells Capital Management.  “People are still locked into the view that consumers are facing record burdens, and they are not.  There has been a change that is sustainable and durable,” he added.

Total consumer lending saw growth in the first quarter marking the first increase since 2005 according to a quarterly Fed survey released in May.

Reports suggest that declines in defaults are a contributing factor to why banks are more willing to lend although debt remains high. However Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York, believes “high debt is not a negative force.”  The debt-income ratio isn’t reliable in predicting spending, Maki said in published research.  “Stronger credit growth is associated with stronger consumer spending,” said Maki.  “When consumer credit is growing, it is a sign that households have become more confident about income prospects.”  One of the reasons reports show defaults are lower and credit is higher is because “consumers spend money based on their cash flows, and their cash flows are fine,” according to senior analyst Brian Foran of Nomura Securities International Inc.

With consumers more confident, car and motorcycle dealerships are forecasting rising profits.  “ Harley-Davidson is poised to see retail growth for the first time in the U.S. since 2006,” said Craig Kennison, a senior analyst at Robert W. Baird & Co.  The second quarter already saw a pickup in demand for auto loans, according to senior loan officers. This lending increase may also apply to the housing market. When consumers start spending on cars and other large purchases, this means that consumers are starting to feel more confident and consider even larger purchases, such as a new home while interest rates are still low.

So, it’s increasingly apparent that across the country, working Americans are taking the necessary steps to improve their credit.  Credit professionals and retail giants are taking note of the highest U.S. average credit scores in the last four years.  Take some time to assess your finances and spend your money wisely so you can benefit from the loan rebound while interest rates and fees are in consumers favor.

(written by Jonathan Slappey)