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Credit Card Applications » News » Other » Good news in credit indicators

Good news in credit indicators

November 21, 2010
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Fitch Ratings revealed good news for Americans when it recently released data on continued and on-time debt payment by credit card holders. This is indeed good news after the impact of the global economic recession which had disempowered consumers to make necessary purchases and credit payments on time.

Fitch's Prime Credit Card Charge-Off Index is now down to the 9.22 percentage level compared with last month's 10.36 percent. This is a decrease seen to take more effect in the succeeding months as the index finally reached below the double-digit 10 percent level.

On the other hand, defaults on credit cards are at their lowest levels in a period of one year and six months (18 months). Credit card defaults are also 14 percent lower this time of the year compared to the last quarter of the previous year.

Securities for senior cards which are also supported by assets are predicted to stabilize further due to improved availability of credit. The defaults on securities for retail cards also improved albeit an increase in delinquencies.

Fitch's Credit Card Index however said that overall, delinquencies improved in general. The percentage of cardholders previously delinquent by a time period of two months or 60 days decreased by 6 percent. Delinquent cardholders for a 60-day period are now at 3.5 percent, the lowest over the 36-month or two-year monitoring period.

For delinquent cardholders in late stage, at about this same period in the last year, their percentage has decreased which registers an improvement for nine months straight. At the last quarter of the year 2009, and in comparison with the current time period, there is a 17 percent decrease in the number of late stage delinquencies.

The delinquencies in the early stage (measured by a 30-day period) also decreased by one point. The improvement puts the percentage at 4.61 for early stage delinquencies. Measuring this is important because the probability of an early stage delinquency is the determinant of the defaults on securities for a 90-day period (3 months).

The figures indeed bring good news at the moment but problems still exist in relation to unemployment. Fitch's Managing Director Michael Dean said that although the figures at Fitch Ratings indicate eventual consumer rise from the economic downturn, the figures of unemployment still remain far from encouraging.

Early this year, Dean recounts that the unemployment rate has been at its highest and is just minimally below the 10 percent mark. For this, Dean concludes that hopefully, good credit indicators can help reduce the unemployment rate.

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