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Consumers Doing a Better Job Paying Their Debts

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Wall Street traders may still be jittery about the state of the economy, but American consumers appear to be doing everything they can to help the nation’s finances return to stable footing. New delinquencies on credit cards and mortgages continued to drop over the last four months, suggesting that many consumers have succeeded in taking better control of their debt.

The first bit of good news comes from TransUnion, one of the three big national credit bureaus, which reports that the credit card delinquency rate, defined as the number of borrowers 90 days or more past due, fell over the last quarter to its lowest rate in 17 years. It was the sixth straight quarter in which the delinquency rate dropped.

[Related article: Delinquency and Default Decline Nearly Across the Board]

The average consumer had $4,699 in credit card debt last quarter. That’s $20 higher than during the first quarter of 2011, but it’s still close to the all-time record low, TransUnion reports.

“National credit card delinquency rates have fallen to levels not seen since 1994 as consumers continue to tighten their spending,” Ezra Becker, research director for TransUnion, said in the company’s press release.

What’s true of credit cards is also true for mortgages. The rate of homeowners who are more than 60 days past due on their mortgages dropped to 5.82% in the second quarter, TransUnion found, the biggest decline since the government declared the recession over more than two years ago.

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While one might expect mortgage delinquencies to go up, due to high unemployment and the increase in falling home prices that are causing houses to be worth less than their mortgages, TransUnion chalks the decline in delinquencies up to a renewed sense of responsibility on the part of both borrowers and lenders. Lenders are becoming more conservative by way of extending credit to those who are highly likely to repay, according to the TransUnion report.

“Not only are these consumers less likely to default if house prices continue to edge downward throughout the year, but their willingness to repay their debt obligations in the face of high unemployment rates is greater,” Tim Martin, head of TransUnion’s housing market group, said in a press release.

The credit bureau isn’t the only company noticing the change in consumer behavior. While delinquency rates at Bank of America and Citigroup nosed upwards in the last quarter, other issuers saw their rates decline, according to reporting by the Associated Press.

The increased rates at Bank of America and Citi “are just monthly noise,” Jeff Hibbs, an analyst with Moody’s, told the AP. “The overarching trend of improvement across the industry continues.”

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Image: James Collins, via Flickr.com

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  • http://blog.unibulmerchantservices.com M. S.

    I think the big story out of TransUnion’s and Experian’s latest studies is that Americans are now making their credit card payments on time at a much higher rate than they did in 2007, while exactly the inverse is true for mortgage payments, with 25 percent more consumers paying their mortgage 60 days late than did in 2007. http://blog.unibulmerchantservices.com/americans-continue-paying-down-credit-cards-before-mortgages

  • LL1021

    Americans are also paying off and closing their credit cards and moving to cash, check or debit in record numbers. They are goiing back to the days of save and then buy. The recession thought us a lesson. Be debt free and worry free and save, save, save. Have the funds to buy what you want and be rewarded by the fact you paid for it yourself and are not making monthly payments to a credit card company. They continually do soft pulls of your credit report and if they get a whiff of trouble your 14% goes to 30% just like that. We decided 10 years ago to get rid of the cards and it’s been great ever since. We will not worship at the FICO altar. If we have to pay a little more for car insurance, so what.

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