U.S. Credit Situation ‘Unfavorable’
The nations credit situation is deteriorating…
According to Moody’s Investor Service, the nations credit performance is considered ‘unfavorable’ for the first time since 2003. In February, all five indexes which track more than $410 billion in U.S. credit card assets deteriorated. A rise in personal bankruptcy write-offs are largely to blame since falling off dramatically after the new bankruptcy law went into effect in 2005.
Credit card account balances written off as uncollectible went up to 4.51 percent in February from a near record setting low of 3.36 percent a year ago. The delinquency rate, monthly payments more than 30 days late, rose to 3.89 percent from 3.78 percent a year ago. Paybacks have dropped from 17.99 percent a year ago to 17.72 in February.
The drop in performace comes at a time when a slowing housing market has put a camper on consumer confidence. During the housing market boom of recent years, homeowners were taking advantage of low interest rates to refinance or borrow money which fueled a rise in personal consumption. Consumer spending accounts for approximately 70 percent of the U.S. economic activity has slowed to 3 percent in the first quarter of 2007 down from 4.8 percent the pervious year.
The good news regarding the future performace in the credit card sector is that the economic factors that are important such as employment continue to be strong. And although the delinquency rate has been on the rise from a year ago, the rate was below the long-term average.
