Delinquencies Rise; Card Issuers Show Willingness to Lend to Consumers with Low Credit Scores

Late payments made to credit cards account and defaults seem to have stopped declining after roughly a year and a half of steadfast improvements. 

"The improvements are tapering off," said Mike Dean, who is a managing director at Fitch Ratings, according to The Washington Post.

There were mixed results reported by the six biggest credit card issuers for October regarding consumer payment behavior. Half revealed increased default rates while the other half laid claim to fewer defaults. September`s results were much the same, which ended the ongoing trend of delinquencies dropping in number since the start of 2010. A delinquency is defined by the industry as a payment that is late by 30 days or longer.

This shift appears to be an indication of many consumers slowly returning to the seasonal payment habits they demonstrated prior to the recession, wherein consumers would be sluggish about making payments on time in the fall, then making up for any lapsed payments right after the start of the new year.

However, delinquency and default rates nationwide remain historically low. This could be because credit card companies terminated the accounts of borrowers who struggled to make payments throughout the housing crisis and as unemployment numbers climbed. According to Moody`s, banks wrote of an estimated $70 billion in credit card debt that was unpaid beginning in the end of 2008 through the end of 2010. Those consumers who defaulted on their credit cards during that timespan have found it difficult to reopen new lines of credit, which has helped to keep the country`s overall low delinquency and default rates low.

Now lenders are reaching out once again to consumers with low to moderate credit scores and extending them the opportunity to carry credit cards once again. According to the credit reporting bureau TransUnion, in June through September of this year banks issued nearly 250,000 more credit cards to consumers with spotty credit histories. This is being done by card companies in an effort to expand their business.

Should the delinquency and default rates mirror what has occurred in the past, experts expect both to dip once again come springtime.

Bryant Park

Bryant Park is a financial consultant for one of the companies listed on Wall Street. He writes on a variety of topics ranging from credit cards to different loans that can be availed by consumers. He holds a bachelor degree in Financial Services from Dartmouth College.