By the end of 2016 consumers held over 12.6 trillion dollars in household debt, tapping on the door to the all-time high of 12.9 trillion dollars, reached in late October 2008, just before the Great Recession. The recession brought on massive loan defaults leading to financial write-offs by banks and lending institutions. As a result of the high level of charge-offs and increased regulation aimed at preventing another crisis, banks tightened lending requirements, turning away even highly qualified applicants. After falling sharply in 2008, consumer debt balances began steadily rising for the last three and a half years. With lending policies loosening and unemployment rates remaining low, available money is rising quickly.
Archive for month: November, 2017
The three major credit bureau reporting agencies, Equifax, Experian, and TransUnion will stop reporting most tax liens and judgments on credit files beginning July 1, 2017. The news made headlines in the Wall Street Journal and has significant implications for millions of consumers facing lower credit scores due to derogatory information found in public files.
There was a time when attending college assured you of a better job, higher wages, and financial security. Many still tout higher education as the single best solution to provide upward mobility.That was when the majority of workers did not have college degrees. Today, 36% of the workforce carries a bachelor’s degree or higher, where 34% have a high school diploma or less. The changing tide makes a college degree a basic requirement for many jobs, but may not carry the pay increases it once did.
As household borrowing levels surpassed pre-recession numbers seen in 2008, 2016 was a record-breaking year for debt accumulationThis time around consumer debt is not focused on the housing market:Consumers have concentrated borrowing for educational purposes in the form of student loan debt, rising credit card balances, and the purchase of expensive vehicles. Auto loan debt increased by 22 billion dollars in the last three months of 2016, topping 1.1 trillion in total indebtedness.
Economists view increased spending, and, even debt accumulation, as a sign of consumer confidence. However, there are striking similarities to lending practices seen just prior to the housing market crash of 2007 which spurred a recession that lasted for close to two years.