Remember a few months ago when we said that the nation’s credit problems were likely to get worse before they got better? Unfortunately, a new report shows that they have, indeed, gotten worse. More Americans are now delinquent on their credit cards than at any previous time in history, according to a report by Fitch Ratings, a debt rating company.
The report finds that 3.75 percent of all credit card payments were at least 60 days late in January. That narrowly beat the previous record of 3.73 percent, set in February 1997. The news comes as more Americans find themselves squeezed by large-scale economic forces.
“U.S. consumers continue to struggle in the face of mounting pressures on multiple fronts, from employment to housing to net worth,” Michael Dean, a managing director at Fitch, said in the report.
That wasn’t the end of the bad news. Credit card companies reported that charge-offs rose 40 percent in January over the same time period in 2007, meaning that they were unable to recover 7.5 percent of all credit card charges. Charge-offs on retail store credit cards rose 44 percent, leaving 5.2 percent of the debt uncollectible. These were the highest levels recorded since Congress toughened bankruptcy laws in 2005, according to the report.
This follows news from last month (via LA Times blogs) that more Americans are missing the payments on their home equity lines of credit, and that the number of people delinquent on their car loan payments reached the highest levels ever recorded by the Mortgage Bankers Association.
What this means
The silver lining to this very dark cloud is that finally, Americans seem to be learning that they can no longer live beyond their means. While many people who are unable to pay their bills are the victims of unforeseen layoffs, some were simply stretched to the limit before the economy took a nosedive. The irony is that with car manufacturers offering deep discounts, Congress considering big incentives for home buyers and real estate prices falling in much of the country, now might be the best time in years to buy something big. If you are in a position to help spur the economy, however, just make sure you can actually afford the payments.
Credit.com has a worksheet to help you calculate your monthly budget.
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