Credit card default rates still rising to record levels

The Standard & Poor’s/Experian Consumer Credit Default Index indicates that credit card default rates are still rising to record levels.  The default rate is now at 9.41 percent, the highest percentage recorded since the index began in 2004.

On a more positive note, as the unemployment numbers continue to improve, indices will begin to reflect an abatement of defaults.  In fact, some indices are already beginning to show the rate slowing down.  Naturally, there will be a lag in indicators as consumers get back to work and begin paying their bills.

Overall, the fact that default rates are so high does not bode well for a speedy economic recovery, which will be fueled, in large part, by a healthy and confident consumer. 

Read more about the newest statistics as reported by The New York Times.

Comments

[Carole May]

Thanks, Kevin. You know I was thinking the other night that we learned so many subjects when I was in school that I have absolutely no use for in my every day life. Never were we offered courses in how to manage money, credit, etc. I hope you run again for office and that one of your first proposals will be to get financial education in the schools. I wish that when I was in my 20's I knew what I know now...

Carole

[Kevin D. Johnson]

Definitely leave it open, and use it about once a quarter so the issuer doesn't close it. Pay it off within the grace period. Finally, keeping it open will ensure that your debt-to-available-credit ratio is low. This is a major factor in your credit score, and you want to maintain a good ratio.

[Carole May]

Not a comment, but a question that perhaps someone can answer for me.

I'm in the process of paying off my credit cards and will have everything paid off by early 2011. Once a card is paid off, is it better for me to close it, or leave it open? I'm trying to get my FICO score up higher, and I've heard a lot about income to debt ratio.

Thanks,
Carole