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Americans Cut $600 From Credit Card Balances in 2 Years

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Consumers have drastically changed their borrowing habits in the wake of the recent national recession and in the last few years many experts said that as the economy improved, things would slowly regress back to pre-downturn conditions. However, that hasn’t happened yet, and might not do so for some time.

Many financial experts have long held that this might be the year in which borrowers return to their pre-recession money habits, but data from late last year shows that if that’s going to happen, changes would have to come in a hurry, according to new data from the credit scoring organization FICO. While the number of accounts being opened nationwide as of October 2012 is up appreciably from the rate seen in April 2010, when the downturn was just barely over, it’s still well below the levels seen in October 2006, prior to the financial meltdown.

Through last October, 1.07 million Americans with credit scores of more than 620 had recently opened new credit accounts, compared to 47,000 with scores below that level, the report said. That was up overall from the combined 723,000 two and a half years earlier, but down from the nearly 1.55 million in the same month six years earlier. Similarly, only 46 percent of the U.S. population has had one or more credit inquiries in the previous year, compared to a similar 44 percent soon after the recession, but down appreciably from 54 percent in October 2006.

And at the same time, consumers continue to cut their credit card debt, though at a slower rate than what was seen during the recession, the report said. Consumers cut some $600 from their average balances between October 2010 and the same month last year, but in the prior 24-month period, those declines approached $900. By contrast, between October 2006 and October 2008, borrowers added nearly $700 to their average credit card balances.

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Part of the reason for those more appreciable declines immediately following the recession may be that lenders charged off significant amounts of money as being uncollectable when many consumers began defaulting on their credit cards en masse. Consequently, it’s possible that the low default rates seen since combined with the still-falling debt shows consumers are simply now being more conscientious in dealing with their outstanding balances overall.

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