Credit and Household Debit is on the Rise for Americans

According to a new survey by the Federal Reserve Bank of New York, total household debt for Americans rose 2.1 percent, or $241 billion, in the fourth quarter of 2013. This increase was driven primarily by new mortgages, car loans, and student loans. After a long period without borrowing, it appears Americans have regained their confidence. However, an increase in borrowing could also be the result of the inability to maintain spending levels in the face of unemployment or stagnant wages.

An increase in debt is not always a negative sign. Mortgages and car loans could be positive economic signs signaling that people are investing in the future.  However, other types of debt, like student loans, can have a negative impact on the economy by not allowing discretionary spending for several years.

In addition to the rise in mortgages, car loans, and student loan debt, the average amount of credit card debt rose in the last quarter of 2013 as compared to the previous quarter. However, people whose credit score is well above average drove this increase. Despite this upward trend, the average amount of credit card debt did decline as compared to the last quarter of 2012.

In addition, the delinquency rate also rose in the final quarter of 2013. The delinquency rate is the ratio of borrowers who are more than 90 days late on credit card payments. The delinquency rate rose from 1.36 percent to 1.48 percent between the last two quarters of 2013. According to its study, TransUnion does project the consumer delinquency rate to rise to approximately 1.57 percent by the end of the first quarter in 2014.

TransUnion also reports the number of credit card accounts is up in 2013 as compared to 2012 from 329.48 to 341.40. At first glance, this increase appears to be positive, given there are still at least 40 million fewer accounts today than there were just five years ago. In addition, the demand for credit is much lower. This trend tells us that consumers are managing their current lines of credit more effectively.

If your personal amount of debt has recently increased, and your credit is beginning to suffer because of it, you should consider credit repair. Let us at Ovation help you. We offer several credit repair solutions, which are customized to meet your unique needs. At Ovation, we believe that no two people are alike; therefore, our approach is always unique.

Contact us today to see how we can help.

 

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