May 21, 2010
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News: CC Defaults On The Decline
According to a recent report by the Standard & Poor's (S&P) Experian Consumer Credit Default Indexes, Americans continued to struggle paying off credit card debt during the first quarter 2010. The S&P showed that the overall U.S. credit card default rate rose to 9.14 percent, the highest level in the history of the firm's record keeping. Unlike mortgages, auto loans, and recreational vehicle loans which analysts say have already peaked, card defaults have continued to grow. Experian credit reporting bureau provides the information that S&P uses to measure the data for the index which is based on the number of credit card accounts going into default. The report uses a three month rolling average.
Unlike mortgages, auto loans, and recreational vehicle loans which are written off after the borrower is three months past due, the S&P Index measures credit card data that is at least six months past due which the lender has already written off or the cardholder has filed for bankruptcy. Accounts are only used once for the S&P report. Therefore, if an account becomes delinquent and is used in the collection of data, it will not be considered a second time if the cardholder should bring the credit card account current and then default again.
Although auto loans did become a problem as well, they did not follow the same default pattern as credit card accounts. According to the report, auto loans peaked in February 2009 at 2.75 percent and fell to the lowest its been in two years to 1.94 percent. Mortgage loan defaults peaked in April 2009 at 5.67 percent and to date has dropped to 3.71 percent. Home equity loans peaked as well in March 2009 at 4.66 percent and are currently down to 2.49 percent. Experts say that the report is another sign that the economy has begun its turn around and that those Americans who expect to default have already done so.