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Consumer credit delinquencies decreased in fourth quarter 2011

James Chessen

According to a report released on Thursday by the American Bankers Association, consumer loan delinquency is down across all 11 loan categories, a sign that the economy is improving.

In the fourth quarter of 2011, fewer borrowers were delinquent on loans than in the third quarter. Total credit card delinquency was 3.3 percent for all accounts, a decrease from five percent in the second quarter of 2009, the Los Angeles Times reports.

“It’s always a bit shocking when every single category shows a decline in delinquencies,” James Chessen, the ABA’s chief economist, said, according to the Los Angeles Times, adding that the last time the country saw such a low delinquency rate was in the last quarter of 2004.

Since the Federal Reserve lowered interest rates and more Americans have been keeping a close eye on their budgets, consumers are now starting to see the benefits.

“They’re managing down the debt they do have much better, and the amount of debt as a portion of income is going down,” Chessen said, the Los Angeles Times reports.

The U.S. financial system is also in better shape with banks more willing to issue loans. A recent report issued jointly by Moody’s Analytics Inc. and Equifax Inc. revealed that the number of credit cards and auto loans issued to individuals with no or bad credit is rapidly increasing. Chessen said that this inclination demonstrates the confidence of bankers in a much-improved economy.

Chessen added that while home loan delinquencies have slowly declined, the number is still high, partially due to the rapid rise in gas prices.

“The more money you pull out of your pocket and put into a gas tank, the less you have for paying your debts and spending on other things,” Chessen said, the Los Angeles Times reports.

Chessen also attributes an improving job market to the decrease in loan and credit delinquencies.

“The connection is obvious: When someone loses a job, it’s much more difficult for them to meet their obligations,” Chessen said, according to the Los Angeles Times. “If we continue to see steady growth in jobs, we’ll see continued improvement.”

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