Credit card delinquencies have jumped across the United States, with Wyoming, Rhode Island, and Alaska seeing the largest increases, according to the latest data from personal finance company WalletHub.
“While some credit card delinquency is always inevitable, when the rates of delinquency increase, that can indicate the economy as a whole is struggling,” the report stated.
“Being delinquent on a credit card is very bad for your credit score, and late payments remain on your credit report for seven years. Payments are only reported to the credit bureaus as delinquent once they are 30 days past due.”
Wyoming topped the list of states with the largest increase in delinquencies, rising almost 54 percent over the year.
The state’s residents also have “very large” credit card debts, WalletHub said. High debt levels combined with high interest rates create an environment for a spike in delinquency, according to the company.
“In addition, Wyoming only ranks 43rd among the best states for jobs, and lackluster job markets can make it more difficult for residents to keep up with credit card payments.”
Second on the list was Rhode Island, followed by Alaska, Nebraska, Hawaii, New Jersey, Massachusetts, and Oregon, all of which saw delinquencies jump over 40 percent.
The state with the lowest increase was Mississippi, followed by North Dakota, Arkansas, and Oklahoma—all of them saw delinquencies jump by around 25 to 30 percent.
Chip Lupo, a WalletHub analyst, warned that long-term credit card delinquency “can lead to large drops” in people’s credit scores. As such, it is imperative to pay off dues as quickly as possible, Lupo said.
“The good news is that if you manage to get current before 30 days have passed, your delinquency will not be reported to the credit bureaus,” he said.
“If you’ve been delinquent for a significant period of time, there are other strategies you can pursue in order to get back on track, such as hardship programs, strategic budgeting, and consolidating debt.”
BNPL Loans
A recent report from the Consumer Financial Protection Bureau found that more than a fifth of American consumers with credit records used Buy Now, Pay Later (BNPL) loans in 2022.Most of these people had credit scores that were subprime or deep subprime. Low credit score borrowers accounted for roughly two-thirds of BNPL loans.
BNPL debt was highest among youngsters between the ages of 18 and 24 in terms of the percentage of their total debt.
“More than three-fifths of BNPL borrowers held multiple simultaneous BNPL loans at some point during the year, and one-third had loans from multiple providers,” the bureau said.
“BNPL borrowers were also more likely than other consumers to have higher balances on other unsecured credit lines such as credit cards.”
Around 40 percent of surveyed people who haven’t used these loans were found to be “likely” or “very likely” to use them in the future.
Nearly three in 10 people who use BNPL expressed concerns about how such loans impact their credit scores. At present, the majority of these loans do not get reported to consumer reporting agencies.
“One of the key takeaways from the research is that BNPL is here to stay,” said Liz Pagel, senior vice president and head of consumer lending at TransUnion. “Consumers find value in the product and they overwhelmingly like the experience of using it.”
“While the financial services industry is clamoring for visibility into BNPL data, consumers see the benefits of credit reporting as well. This growing industry could become a force for financial inclusion as the data begins to enter the credit reporting ecosystem.”
