Bad Consumer Credit Situation Will Only Get Worse
-- September 2, 2003
While the US economy is showing some signs that it's turning toward a short-term recovery, US consumer credit quality is in sorry shape -- and it will only get worse in the coming months.
Bankruptcies and charge-offs remain at high levels and late-stage delinquencies are way above year-ago levels. According to international ratings agency Fitch Ratings, the trend will worsen in the fourth quarter and into next year.
Personal bankruptcy filings jumped 10.2% in the second quarter of 2003 as 430,926 Americans cried financial "uncle." So far this year, more than 835,000 individuals have declared bankruptcy. Fitch expects bankruptcies to increase about 8% to 1.65 million, but the final figure will likely be higher.
Why? Because more and more households are stretched to the breaking point thanks to a weak job market, rising interest rates, and the drying up of the mortgage boom that allowed households to tap their equity for spending money.
As more and more people declare bankruptcy, banks and credit card issuers will be forced to write off the bad accounts -- that's another stumbling block on the bumpy road to a real recovery!
Consumer Credit Getting Worse