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Consumers forgoing mortgage payments to pay down credit cards

Though many American consumers had begun paying down debt before and following the 2008 financial crisis, experts say the recent increase in consumer debt could be causing financial turmoil for some consumers.

At the end of 2011, TransUnion’s Credit Risk Index showed an increase in the amount of consumer credit risk, the first increase since 2009. Charlie Wise, a research director at credit reporting agency TransUnion, said that late mortgage payments contributed to the increase, according to Fox News.

According to Debtmerica Relief, some experts also attribute this to subprime borrowers who have again been given access to credit cards that they had previously be ineligible for, though many of these cards are associated with high interest rates.

Wise said that this is “affecting the risk profile of the overall group,” Fox News reports.

Lenders have recently sought to offer credit to borrowers who were previously considered “risky,” and those who found themselves locked out of credit cards are taking advantage of the present offers, according to Debtmerica Relief. During and after the financial crisis, many lenders stopped extending credit to those customers. As a result, Wise says, credit cards have become a “scarce financial asset.”

“Consumers are doing everything they can to preserve access to this asset,” Wise said, Fox News reports.

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