Forced Credit Account Closures Rising While More Applications Denied


According to Federal Reserve data, serious credit card delinquencies rose sharply in late 2016 and continued to grow through 2018, nearing 5% of cardholders. Similarly, involuntary account closures rose from 4.2% in 2016 to 7.2% in 2018 – but why?

If the economy is doing so well, why are people having trouble paying credit card bills and having accounts closed? Credit scores provide a clue.

A low credit score is a solid indicator of risk for credit card companies. Involuntary account closures are approaching 20% for consumers with credit scores below 680, while transitions into serious delinquency are approaching 25% for those with scores below 620.

In addition, overall revolving debt (mostly credit card debt) has grown from $969 million in 2016 to $1.037 trillion as of the third quarter of 2018.

Given increases in debt and delinquency, card issuers believe they were too free with post-recession credit – and they are reacting accordingly. In t…

Nearly 1 In 4 Feel They’ll Never Escape From Significant Debt


According to the latest Household Debt and Credit Report from the New York Federal Reserve, America’s total household debt has surpassed $13.5 trillion. Do you sometimes feel like $13 trillion of that debt is yours?

Based on a recent survey by LightStream, almost one-quarter (23%) of Americans believe that it’s nearly impossible to climb out of significant debt once you acquire it. The sense of hopelessness can lead to bad decisions and a treadmill of running debt. In that harmful mindset, $13,000 might as well be $13 trillion – you’ll never pay it off anyway.

Don’t let despair blind you from alternatives. According to LightStream senior vice president Todd Nelson, “People who are carrying debt often overlook cost-reducing solutions.” Nelson adds that debt consolidation can be a smart strategy that can benefit Generation Xers (ages 36-51) with good credit.

Why does Nelson highlight Generation Xers? LightStream found that while large majorities of adult …

More Americans Defaulting On Credit Cards


According to the Federal Reserve’s G.19 Consumer Credit report, America’s outstanding revolving debt – mostly credit card debt – was closing in on $1.04 trillion as of June 2018. How will we pay all that money back? An increasing number of Americans may not be able to do so.

ValuePenguin analyst Joe Resendiz calls credit card defaults “a cause for concern.” Resendiz highlighted increased second-quarter credit card default numbers for both JPMorgan and Bank of America as disturbing points amid generally good reports.

The second quarter 2018 Household Debt and Credit Report from the New York Federal Reserve backs up some of these concerns. At 6% of all consumer debt, credit card debt remains firmly in third place for all non-mortgage consumer debt behind student loans (11%) and auto loans (9%). However, the sheer number of credit card accounts – approximately 480 million, over four times the number of auto loan accounts and over five times the number of mortgage lo…

This Lender Repos 1 In 3 Cars It Finances


We frequently hear about America’s crushing student loan debt – but auto loans are not far behind. While student loans are approaching $1.5 trillion, outstanding auto loans topped the $1.2 trillion mark in the third quarter of 2017 according to the New York Federal Reserve.

Subprime borrowers (FICO credit scores below 620) hold almost one-quarter of the dollar value of auto loans. Given that level of risk, it’s no surprise that over 4% of auto loans are delinquent by 90 days or more and repossession is a real threat.

Subprime lenders are more likely to repossess autos since they service higher-risk clients. However, Jalopnik reports that one lender – Credit Acceptance – expects to repossess 35% of the cars that it finances every year. It’s difficult to absorb that default rate without charging high interest rates to make up the difference. Borrowers who already have difficulty paying receive rates that make monthly payments even higher – leading to a cycle of def…

Credit Card Delinquencies Soar


America’s economy is improving by most standards – but is it improving on the backs of excessive debt?

According to the New York Federal Reserve, total household debt reached a new high of $13.15 trillion in the fourth quarter of 2017. While the majority of household debt is mortgage debt, consumer credit rose by the largest amount in sixteen years, and revolving debt (primarily credit cards) increased by a substantial $26 billion from the third quarter of 2017.

Debt is not necessarily bad, even high-interest credit card debt, as long as it’s managed well. Unfortunately, Federal Reserve data also shows a general increase in credit card delinquencies.

Credit card delinquency rates had decreased steadily from the 2009 recessionary peak of 6.7% down to 2.12% in early 2015, but since then delinquency rates have trended upward. Delinquencies dropped slightly in the fourth quarter of 2017 – from 2.52% in the third quarter to 2.48% – but the overall upward tre…

Can Minor Debts Land You In Prison?


The Equivalent of Debtors’ Prison

Is there such a thing as a modern-day debtors’ prison? Not literally, as
debtors’ prisons were outlawed by Congress in 1833. However, a recent ACLU
report on the criminalization of private debt points out that some private debt
collectors are creating the equivalent of debtors’ prison via the courts.

The ACLU found instances of debtors being arrested for debts as small as
$28. Once incarcerated, the debtor may be stuck in jail for days trying to
arrange bail, missing work and family obligations. Jobs may be lost, and the
warrants and arrests may show up on future background checks – making it
difficult to get a new job or go back to school.

While these tactics may be technically legal, the result is often a
punishment far greater than the crime.

It’s Not Just “Deadbeats”

The ACLU report breaks the stereotype of the deadbeat willfully tr…

6 Steps To Take When Your Car Is Repossessed


“Dude, Where’s My Car?” may be the name of a lame Ashton Kutcher movie, but it could also be your response as you realize that your car has been repossessed.

Just like a home, a car is not yours until it is fully paid off. The creditor has the right to repossess it under certain circumstances, typically for failure to make payments. The same principle applies to purchased and leased cars.

If your car has been repossessed, what action should you take? We suggest starting with the half-dozen below.

1. Assess Damage – Repo companies have the right to take your car, but not the right to damage your property or use excessive force in the process. Document any property damage or other harm caused by the repo agency. You may be able to take action and get reimbursement for the damage, and potentially even have the car returned to you.

2. Find Out The Reason – If you haven’t been making payments, you know…

3 Top Reasons Why Rentals Are Denied


Has your rental application just been rejected? Determined to make lemonade out of lemons, you resolve to find out why you were rejected and change the situation so that your next application is approved.

Assuming that you filled out the application correctly and made no obvious mistakes such as bringing your pet rattlesnake or a running chainsaw to the rental office, what are the most likely reasons for your rejection? Rent Café recently released their findings on the top reasons for rental rejection – and the results may surprise you.

1. Neglecting to Make Payments – Sean McQuay, Credit and Banking Expert at NerdWallet, says, “A lot of rental agreements require a credit check. They are not checking your credit score per se, but they are going to make sure that you pay your bills on time.” It’s one thing to be late on your bills, but it’s another …

Corporate Defaults In Emerging Markets Hit Six-Year High


The worldwide economic slowdown has begun to take a toll in yet another arena of worldwide finance: the default rate of corporate debt in emerging markets. Companies from emerging markets are defaulting on their debt at a rate of 3.8% — the highest level since 2009. Through November 2015, that represents an increase of 40% over 2014. For reference, U.S. companies defaulted at a rate of 2.5% over the same time period.

There has been a complete reversal from just four years ago, when U.S. companies were defaulting on loans at a 2.1% rate while the emerging market default rate was down to 0.7%. The U.S. was just embarking on a relatively slow recovery while emerging market economies were growing at close to 7%, buoyed by tremendous growth in China. Stimulus efforts in the U.S. and other developed nations kept interest rates extremely low, driving more bond investments toward corporate bonds of emerging markets in search of higher returns.

As a result, emerging marke…