Experts say customer credit quality is declining

The first quarter of this year brought some troubling news regarding consumer credit. The credit card industry saw an increase in the charge-off rate. That reflects the percentage of debt that companies don’t expect to collect. While that rate (3.82%) is low by historical standards, it’s still the highest in seven years, according to Bloomberg Intelligence.

That’s not the only troubling gauge of what’s called “bad debt.” The seven largest credit card issuers in the country all reported increases in the number of accounts that are at least 30 days past due. That’s a key indicator of future write-offs.

Credit card issuers became understandably wary of applicants with less-than-stellar credit after the recession of a decade ago. However, many consumers who experienced credit problems back then are seeing those fall off their credit reports.

As the chief executive officer (CEO) of the third-largest issuer in the country, Capital One Financial Corp., recently told analysts, “We may be looking at data that might not paint the full picture of a consumer’s credit history.”

Amid what the Capital One CEO refers to as a “degradation” of credit quality among some borrowers, banks and other credit card issuers are again tightening their requirements. The CEO of Discover, another key name in credit cards, says, “You’re going for people who have many choices — they have existing cards, they could get any card they want. So our job is to make sure those are the ones we attract to Discover.”

Even if you have a stellar credit record, it can be all too easy to get mired in debt. That’s particularly true if you have an unexpected financial setback like a job loss or a serious medical condition. If you find yourself in this situation and see no way out, it may be worthwhile to consider the option of bankruptcy. An experienced bankruptcy attorney can provide more information based on your specific circumstances.