Creditnet News Story
Fitch: Charge offs increase, delinquencies decline
Thursday, March 4, 2010
By William Davis
Unemployment tied to recent numbers.
A recent report indicates that more people may be having problems with their credit score, as defaults on credit card accounts increased in January.
According to Fitch Ratings, the charge off index on credit card accounts went up to 11.37 percent during the first month of the year. That is the highest rate seen since September 2009, when the index reached a record level of 11.52 percent.
As charge offs increase, card companies may be more reticent to grant credit card offers to some consumers, especially if they have a low credit score. This is because lenders are trying to reduce the amount of risk to which they may be exposed through lost funds.
Though charge offs increased, the number of early- and late-stage delinquencies declined, which means default rates could fall in the future. Accounts that were at least 60-days late dropped to 4.16 percent, marking a 0.03 percentage point decline. Those that were 30-days late fell 0.06 percentage points to 5.38 percent.
"Until we see some meaningful improvement in employment numbers, consumer delinquencies and defaults will remain elevated at or near these levels," said Michael Dean, managing director for Fitch Ratings.
In January, the unemployment rate was reported at 9.7 percent, while the previous two months saw it at 10 percent.
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