Credit card debt falls alongside credit scores
January 23, 2012
A robust holiday shopping season apparently led some Americans to delay extra debt payments during December, but that didn't prevent the nation from ending on a high note. Despite a slowdown in debt payments at the end of 2011, all 50 states ended the year with less credit card debt than when the year began.
According to a recent report issued by CreditKarma.com, credit card debt declined 11 percent nationwide last year. However, it wasn't all good news. Credit scores saw a decline during that time as well.
Average credit card debt at $6,576
Overall, the news on debt was positive for 2011. According to the report, debt loads in four out of five categories remained steady or declined:
- Credit card debt declined 11 percent to an average of $6,576
- Student loan debt declined 9 percent to an average of $26,272
- Home equity debt declined 4 percent to an average of $47,905
- Home mortgage debt held steady at $173,876
- Auto loan debt increased 2 percent to $15,504
While consumers seemed to make strides in reducing their debt obligations, the holiday season seemed to curb payments. According to December data, only nine states saw their consumer debt reduced from the previous month. In addition, the decline was less than one percent in six of those nine states.
Of the states that saw an increase in credit card debt from November to December 2011, the jump was greatest in Delaware and Rhode Island. Those states saw a five percent increase in credit card debt bringing their averages to $7,423 and $6,388, respectively.
Credit scores drop in 2011
Credit card debt wasn't the only thing dropping in 2011. The report also found that credit scores were on the decline as well. Last year, the national average fell eight points to 660. California, Massachusetts and New Jersey were all tied as the states with the best consumer credit scores with an average of 679. The state with the lowest average score was West Virginia at 637.
A consumer's credit score is used by lenders to determine eligibility for loans and lines of credit. Those with lower scores are considered a higher risk and more likely to be charged higher credit card rates. They may also be denied credit or given less favorable lending terms.
Scores can range from 300-850, and factors such as total debt, type and age of credit accounts and late payments are used to determine an individual's rating. Age, race, occupation and salary are not considered. According to Experian, a credit reporting agency, credit scores greater than 700 generally indicate good credit management.