Creditland Newswire: Credit Card Delinquencies Reach Historic Low

Moody’s Investors Service, one of the “Big Three” credit rating agencies, recently released a report indicating that consumer credit card delinquencies sank to an all-time low in July 2011 as borrowers continued to prioritize paying down their debt over going ahead and making new purchases. The delinquency rate refers to the amount of cardholders with accounts 90 days or more past due. Moody’s report also shows a slight increase in the amount of credit card charge-offs as more lenders deemed severely delinquent accounts uncollectable.

July was, in fact, the 21^st consecutive month of delinquency declines during which the average rate dipped to 3.09%, down from June’s rate of 3.19%. Significantly, July was also the second consecutive month the rate fell to an all-time low since 1989, when Moody’s first began to actually track the data.

The five-point increase in July’s average charge-off rate was due in large part to three of the biggest credit card issuers reporting higher levels of defaults, so according to Moody’s.

“We expect seasonal trends to persist in the coming months and result in flat to slightly higher early-stage delinquencies, even though the underlying credit of cardholders remains ... strong,” stated Moody’s analysts in the report.

The latest reports from TransUnion concur with Moody’s findings. Their data reveals the delinquency rates on consumer credit cards to be at their lowest level in nearly 17 years, marking the largest improvement in such rates since the economic recovery began in 2009.

However, the rate of decline seems to have slowed and the number of accounts, as well as credit card debt limits, rose slightly.

"During the next few quarters we will gain a better understanding of whether this is a permanent or temporary break in the decline of total outstanding consumer debt," a research vice president at the New York Fed said, according to the LA Times.

Jennifer Brown

Jennifer Brown, an external business consultant working with a Fortune 500 company, has years of experience to her credit. Despite having a busy schedule through the day, she takes time out to write articles dealing with credit cards, payday loans and other financial aspects. She has completed her Bachelor degree in Financial Services from Columbia University and has been actively involved in various activities for the betterment of society.