Rising delinquencies mean more damage to credit scores

Oct

Rising delinquencies mean more damage to credit scores

Tagged Under : Credit Scores, Scores

Better credit scores remain beyond the reach of millions of Americans judging from recently released figures from the American Bankers Association.

With a recession that has been in place since the end of 2007, consumers have faced growing debt problems fueled by a rising unemployment rate and a credit crunch that has left many companies reluctant to lend to only those with the highest credit score.

According to the ABA, delinquency rates have hit new records in the second quarter of the year in three categories, indicating that people across the economic spectrum are facing greater difficulties than ever.

The newly released statistics show that 5.01 percent of all bank card accounts are now at least 30 days past due, while home equity loans are up 4.01 percent of all accounts and home equity lines of credit stand at a 1.92 percent delinquency rate.

The group did note one area of improvement – auto loans. According to the new figures, 2.46 percent of all direct auto loans are in delinquency, down 55 basis. Indirect auto loan delinquencies, those which are arranged through auto loan dealers, also improved to 3.26 percent of all accounts from 3.42 percent in the first quarter.

“The picture won’t change until the labor market improves and the economy picks up steam. This is going to take time,” said ABA president James Chessen, adding that “the good news is that consumers are clearly being more cautious by saving more, spending less and making great efforts to repair their balance sheets.”

In other findings, marine loans, property improvement loans and RV loans were also said to be facing high delinquency rates for the second quarter. Besides auto loans, the only other area of improvement last quarter was for mobile homes, with 3.53 percent of accounts now in default.

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