When rates of credit delinquency drop, what can it mean for the rest of us? It's good news in this edition of the Credit Report REPORT for those of us across the board. Learn why more folks are doing better with their credit, and if you're among them, pat yourself on the back!
An informative news report with a little bit of fun, the Credit Report REPORT brings you credit and finance straight from the latest headlines. You'll also learn in just a few minutes what can impact your own credit and finances. As we say on the show, "Whenever credit makes the news, we'll make it easy to follow."
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It's no secret that, for decades, millions of Americans have struggled with debt … credit card debt, mortgage debt, student loan debt, you-name-it debt … and after the crash of 2008, things only seemed to get worse. Now, according to a recent report from the Federal Reserve, it looks as though things are really taking a turn for… the better! You heard that right. For the first time in a long time, the numbers are looking up. So if you're tired of hearing nothing but bad news these days, stick around for this edition of the Credit Report Report as we talk about some good news, brought to you by Experian.
The last time we saw movement from the Fed was back in November. They had just raised interest rates by a fraction of a percent, and the pundits were out in full force. Many predicted the end of the world, as we knew it — or, at least, the end of the recovery from the Great Recession. Well, it turns out, the last three months of 2015 saw Americans' past-due debts drop to their lowest levels since a year before the crisis began. Of the 12.1 trillion in outstanding loans, only 5.4 percent were in some stage of delinquency according to the Federal Reserve's quarterly household debt report. Payments that were more than 90 days past due — which usually indicates default — dropped slightly to 3.7 percent, signaling some resilience in the broader US economy. At least that's what the Fed's hoping for — and for good reason.
The nation is facing mounting challenges from lower oil prices and a slowdown in China affecting American exports. When you add the sharp downturn in global financial markets, the Fed believes that the decline in debt delinquency is a good sign here at home — because Americans are in a better position to handle any adversity that the larger economy might send their way.
According to Fed President, William Dudley, "The household sector looks much better-positioned today than in 2008 to absorb shocks and continue to contribute to the economic expansion." He went on to say that, "The great majority of bad debt from the boom years has been charged off, and new foreclosures are at the lowest level we've seen in our data."
We all remember the crash of 2008 and where it started: the housing market. Simply put, people were approved for mortgages they couldn't afford. But now we're seeing a trend of better-qualified homebuyers, with a median credit score of 760, compared to 725 in 1999 according to the Fed's data. Better still, fewer homeowners are refinancing or taking out home equity loans, draining their home equity. And that's helped to drive down foreclosures to their lowest level in 16 years.
According to the Fed, the decline in the stock market is being buffeted by the rise in home prices, which doesn't appear to be slowing anytime soon. In other words, the current financial downturn isn't so much a reflection of the US economy as an indication of the external forces affecting it.
So, like most things in life, it all depends on your perspective. You can be positive about the reduction of debt delinquencies, and rising home prices. Or you can worry about the declining financial markets along with the slowdown in China — and how globalization connects us all. We say, don't worry about what you can't control. Instead, take charge of the things you can — like your own financial habits. If everyone did that, just imagine how much brighter the bigger financial picture would look to us all!
That does it for this edition of The Credit Report Report. Remember, whenever credit makes the news, we make it easy to follow. Thanks for listening and we'll catch you next time.
Editorial Disclaimer: Opinions expressed here are author's alone, not those of any bank, credit card issuer or other company, and have not been reviewed, approved or otherwise endorsed by any of these entities. All information, including rates and fees, are accurate as of the date of publication.
This article was originally published on May 19, 2016, and has been updated.