27
Dec

Consumer credit levels are up significantly in the first nine months of the year, which could lead to some Americans needing the aid of a credit repair firm if they end up falling behind on their payments and damaging their credit score.

According to Equifax's National Consumer Credit Trends Report, consumer credit through September has increased approximately 30 percent to $675 billion compared to the same time period in 2010. Despite the jump in credit origination, the levels are still below pre-recession numbers of about $1 trillion.

Additionally, consumer finance write offs have fallen about 53 percent to $70.9 billion through November. In 2009, write offs totaled $151.8 billion in the same time frame.

"Consumer spending is being supported by gradually opening credit markets, with higher new limits on accounts, a gradual upward trend in non-mortgage consumer debt outstanding, and also consistently low utilization rates," said Equifax Chief Economist Amy Crews Cutts.  "Meanwhile, consumer finance delinquency rates, not including home loans, have returned to pre-recession levels — all signs that the consumer-led recovery is gaining strength heading into 2013."

Auto loans originations jump 
Auto loan originations through September hit a five year high, according to the report, increasing to more than 11 percent to 16.4 million from the same time a year ago. Those loans total $318.2 billion, more than 33 percent higher than the first nine months in 2009.

Through November, there were 58 million outstanding loans in the country, a 37-month high. Meanwhile, balances currently total $775.7 billion, which is a 45-month high.

Credit originations increase as well
Both bank and retail credit cards saw originations increase from recession lows. According to the credit bureau, bank card limits opened through September are up nearly 44 percent to $132.2 billion from the recession low seen in 2010, while retail card limits totaled $47.5 billion in the same period, a 17 percent jump in the same period.

Bank card write off rates have declined 20 percent through the first 11 months of the year, which is a good sign for the improving credit market. However, taking on more debt could lead to many Americans ending up in credit trouble and looking for ways to improve their credit scores.

Ways to help improve a credit score
Those who have seen their credit score take a hit after falling behind on their higher debt payments could benefit from these credit repair tips.

While this may seem like an easy tip to follow, many times this is what gets people in credit trouble. Payment history accounts for 35 percent of a person's credit score, so it is important to always be on time and stay current. Those who have one of their accounts go into collection could see that negative information on their credit report for up to seven years.

To help make their payments on time, people may want to consider setting up payment reminders. This may be offered through online banking services via text or email, or people could set up a calendar reminder on their cellphone or computer. Another good method is to set up automatic debit payments. This allows people to make their payments without having to think about it each month.

Another way to improve a credit score is to keep balances on revolving credit low, as amount owed accounts for 30 percent of a credit score's calculation. Having multiple high balances can have a significant impact on a score, so people should try and keep their credit utilization down. However, it is recommended to pay down debt rather than transfer balances to lower the limit on accounts.

After paying down a large balance, it may be tempting to close the account. Doing so could negatively impact a credit score, though. Instead, people should keep their accounts open and use them sparingly so it stays active. Closing an account lowers a person's debt-to-credit ratio, which could negatively impact the score. In addition to lowering the debt-to-credit ratio, it also shortens the credit history, which could also lower a score.

Not only does closing accounts negatively affect a credit score, but opening too many accounts in a short period of time could also have an impact. Every time a new account is opened, a hard credit inquiry is added to a credit report. Having too many hard inquiries on a report can hurt, and they could take a couple years to disappear. Instead of opening new accounts to have more available credit, people should focus on paying down their current balances, as that would be more beneficial.