Credit Repair Blog

Yikes - Can We Have Some Good Credit News Already?

Three major consumer credit reports came out in the last few days.  All are pretty gloomy.

Two of the reports confirm what everyone already suspects—people are spending less.

This is confirmed by the Discover U.S. Spending Monitor that consumer spending fell for the fourth consecutive month in December, declining more than three points to a brand new low of 76.6 (based out of 100). Both components of the monthly spending index - consumer confidence in the U.S. economy and consumer spending intent - reached new lows during the month, as concerns about the economy may be weighing on post-holiday spending plans.

The fact that consumers are spending less was also confirmed by the Federal Reserve.  The Fed just issued their monthly G.19 report on consumer credit.  Credit card balances shrank in November, as concern over banks’ strict lending standards caused consumers to rein in their spending.

According to the Federal Reserve, the revolving credit category (which is made up almost entirely of credit card debt) dropped by 3.4 percent in November. That’s the largest single-month decrease since April 2004. Previously, the Fed had reported that revolving credit declined in October at an annualized rate of 0.2 percent. However, that number was revised in the current report to be a flat 0 percent. Overall, revolving debt fell to $973.5 billion. It had been $976.3 billion in October’s report on consumer credit.

The third news piece that came out this week is from Fitch Ratings, with their scheduled report on consumer credit.

In some ways, their findings are even darker. 

Fitch reports that US consumer credit deteriorated in December as credit card defaults rose and cardholder payment rates suffered the largest one month
drop on records hurt by a deepening recession.

Fitch said the charge-off index, a measure of default, of prime credit cards rose 31 per cent last month against a year ago to a four-year high of 6.84 per cent. The agency expects it to reach 8 per cent in 2009.

In addition, monthly payment rates, the rate at which cardholders repay outstanding balances, fell 246 basis points month-over-month to 15.96 per cent, the lowest level since 2004.

“Consumers continue to struggle amid a rapidly deteriorating employment situation and from declining property values and other measures of wealth,” said Mike Dean, managing director at the rating agency.

So ... we are spending less but also defaulting on what we owe. 

Come on sunrise!