Photo: Shutterstock / Shutterstock
According to a report presented this Wednesday by the Wall Street Journal, he pointed out that in recent months Americans’ credit scores are falling to pre-pandemic lows.
A clear sign that the economic problems continue is the high delinquencies of Americans with their loans. According to the analysis the high delinquency rate comes amid great anticipation of a looming recession and the probabilities that inflation will continue into the next year.
For 15 months the Federal Reserve has raised interest rates 10 times to control inflation and although it is already showing signs of cooling, even the prices of food, goods, services and rents continue to put pressure on economic stability of American homes.
A study developed by Intuit Credit Karma showed that during the pandemic approximately 25% of borrowers with lower credit scores were able to see their scores rise to between 620 and 659 points, however high indebtedness now led 38% of those borrowers to drop their scores.
Nearly $1 trillion dollars in debt
In May, the Federal Reserve Bank of New York also presented a report in which it detailed the amount accumulated in debt by Americans, which reached the figure of $986 billion dollars.
Bankrate senior industry analyst Ted Rossman noted in this regard that “high inflation is certainly contributing to high credit card balances of Americans, along with record interest rates,” he said.
According to data from the Fed, credit card debt is not the only thing that has increased, the report showed that Americans owe approximately $1.6 trillion in student debt, about $1.5 trillion in auto loans and $12 trillion in home loans, bringing in total the average household owes a record $17 trillion.
The pandemic was a key factor
Brendan Coughlin, head of the consumer banking division at Citizens Financial Group, explained that lenders have long relied on credit scores to tell whether or not a borrower will be able to repay a loan; however, measurements during the pandemic made this more difficult.
“In a normal economy, you probably would have seen a few more people tip over. We needed more information to be confident in how we were underwritingCoughlin told the Wall Street Journal. Therefore, she considered that the metrics presented during the pandemic on credit scores were practically “artificially inflated,” the analyst added.
Keep reading:
- Americans Keep Piling Up Credit Card Debt: These Are The States With The Highest And Lowest Charges
- Savings in US households during the pandemic dried up in the first quarter of the year, according to the Fed
- Less than 50% of Americans say they have enough emergency savings