According to a study produced by Standard & Poor, the national credit card losses have decreased in July. However, it is believed that with the increasing number of people losing their jobs, bad credit records are on their height.
The agency created a ratings credit card quality index which is supposed to measure credit card loans that banks do not expect to be repaid. On June, the ratings reached record high at 10.4 percent. But in July, the record dropped to 9.8 percent. This is believed to have been caused by consumers' cautious spending. At the same time, credit losses also dropped as people used their tax refunds to pay off for their debts.
However still, Standard & Poor predicts that the drop in credit card loss will not be felt for too long nor would improvements on the ratings. Soon enough, the unemployment status of the country is feared to increase and more people would have difficulties meeting borrower obligations. The economic condition is thought to be the greatest recession the country has ever felt since the Great Depression. Consumer credit has now declined for six consecutive months, the first time this has happened since the period from June 1991 to December 1991.
Credit card losses and unemployment already have a proven relationship. In August, credit card losses rose to a 26-year high of 9.7 percent following the increase in the unemployment rate.
Standard & Poor estimates the rate at which people are losing their jobs would still rise to between 10.4 percent and 12.7 for the next twelve to twenty four months. With this it would follow that credit card losses too would go up between 10.5 percent and 13 percent. The agency adds that the losses could further be boosted by banks' and providers' actions to increase interest rates and fees. This has already been expected from credit card issuers as their way to protect their profits before the new credit card law takes effect in 2010.
In totality, the credit card quality index from Standard & Poor has kept track on more than $491.1 billion of receivables held in trusts of rated U.S. credit card-backed securities.
Around eighty percent of the country's credit card industry is made up of American Express Co, Bank of America Corp, JPMorgan Chase & Co, Citigroup Inc, Capital One Financial Corp and Discover Financial Services.
Despite the dire economic conditions and the increasing rate of credit card losses, consumers are still reminded of acceptable ways to rebuild credit. After all a huge number of people are staying positive that the economy will recover.
The following are proven ways to rebuild bad credit:
1. Get a secured credit card from the bank or the credit union.
2. Use a co-signer on your first few credit accounts.
3. Use retailer programs for modestly large purchases like furniture.
4. Get a credit card with any reputable institution that will give you one.
5. Open a savings account and make regular deposits over a period of time.
6. Establish a relationship with your banker/ loans officer informing them that you are on credit repair.
7. Once your relationship is established, take out a small loan using the savings account as collateral.
8. Pay the loan back promptly.
9. Do not make a big batch of credit applications all at once