Charge off rates driven down by more hiring

Delinquent and defaulted credit card debt has been on the decline for some time now, and new data suggests that instances of both are tied very closely to unemployment rates.

As the effects of the recession slip away and employers continue to expand their hiring practices, it’s expected that consumers will make more on-time payments into their various credit card debts, according to new data from the Mercator Advisory Group. When the recession began, instances of both charge offs and early-stage delinquency spiked at the same times unemployment did, and since it ended, both have moved slowly downward.

Now, both of these financial concerns are standing at or near all-time lows for all of the nation’s largest lenders, the report said. However, some experts note that even if unemployment continues to fall from its somewhat elevated state, there must be a logical bottoming-out in charge offs and delinquencies.

This is particularly true because improving credit conditions have allowed lenders to expand issuing to subprime borrowers. In many cases, these consumers are those who ran into financial trouble in the past and ended up having to seek some form of debt relief.