A recent Wall Street Journal article looked at the falling percentage of consumers with “sub-prime” credit scores. The article can be found here.

This is certainly good news for anyone wanting to buy a home, car or take out a loan. However, the good news seems to mask some stubborn trends in consumer lending. First, the percentage of sub-prime borrowers has fallen from 25.5% in 2010 to 20.7% today. While it is great that a large number of people have seen their credit scores improve, over one-fifth of the consumers in this Country are sub-prime borrowers who routinely pay exorbitant car loan interest rates, are locked out of the traditional housing market and may not qualify for a traditional credit card.

Secondly, higher credit scores leads to more borrowing. According to the article, “Already, consumers are starting to borrow more again. Auto-loan balances surpassed $1 trillion for the first time ever this year, according to credit-reporting firm Experian. Credit-card debt is on pace to hit $1 trillion this year. Student-loan debt continues to swell.” This has long term consequences for the typical consumer, as high debt levels typically lead to a default when any interruption in income is experienced. That is becoming evident in the subprime car market where default rates have been increasing and credit card debt defaults have recently increased for five months straight.

Finally, disposable income continues to lag behind debt payment needs. The average consumer has debt equal to 102% of disposable income. Again, any interruption in income and the consumer is bound to default on obligations. One glaring omission from the article is any discussion of increased wages to handle all this new debt.

If your family is still experiencing financial trouble even after the recovery, give our office a call. We have affordable bankruptcy programs designed to help your debt problems. We will counsel you on the potential long term credit benefits of filing bankruptcy in order to help you make wise choices.

At Mickler & Mickler, we attend Court on a regular basis. We have the experience and knowledge to ensure that you receive the correct advice when confronted with difficult financial decisions related to filing bankruptcy. Contact us at 904.725.0822 or bkmickler@planlaw.com.

Bryan K. Mickler