13
Dec

While many Americans have had to seek some kind of credit repair services in the past few years as a result of financial difficulties stemming from the economic downturn, more recent improvements have also put millions in better financial positions. That's expected to continue through next year.

Positive signs in the national economy have become more apparent in the last several months than they were even a year ago, with falling unemployment chief among those helping consumers most. Many consumers are now more capable of making all their various bill payments on time, and as a result, experts now forecast that instances of delinquency will continue to recede next year, according to new data from the credit reporting firm TransUnion. In particular, it believes delinquency on mortgages and credit cards will continue to drop significantly over the course of next year. However, even those bigger improvements aren't where experts feel they should be.

More on mortgages
By the end of this month, it's believed 60-day mortgage delinquency will have slipped to a rate of just 5.32 percent of all outstanding loans, down considerably from the all-time peak of 6.89 percent in the fourth quarter of 2009, which followed 12 straight months of increases, the report said. And over the course of next year, it's likely that the rate will decline to 5.06 percent, a significant improvement.

However, that's still considerably higher than the mark seen prior to the start of the real estate meltdown, which stood at just 1.94 percent of all home loans, the report said. The increase from the pre-crisis number to the all-time peak was 255 percent, and the commensurate declines to today's numbers is just 21 percent, meaning that there's a long way to go. The historical norms for mortgage delinquency is somewhere in the range of 1.5 to 2 percent, and even the declines projected for 2013 — while strong at 27 percent — wouldn't bring the market to anywhere near that number.

Much of the improvement in mortgage delinquency will likely be attributed to consumers who haven't made payments into their home loans in a year or more, the report said. If those people, who are slowly getting back on their feet as a result of improving home prices, were ignored in mortgage delinquency statistics, the rate would be about 2.5 percent.

"As house prices and unemployment slowly improve, TransUnion's forecast indicates that the national mortgage delinquency rate will gradually drop throughout 2013," said Tim Martin, group vice president of U.S. housing in TransUnion's financial services business unit. "While we are encouraged by the direction of the forecast, we would have hoped for a projection that called for a more substantive drop in delinquencies. If the pace of improvement does not pick up, it will take a very long time to get back to 'normal' delinquency rates."

Credit card improvements on the horizon
Meanwhile, 90-day credit card delinquencies have been in a greater state of flux over the past year, but has generally remained well below the all-time highs seen during and following the recession, the report said. It's believed that by the end of next year, the rate will actually increase to 0.87 percent of all accounts from the current 0.83 percent, but that's still well below the average of 1.24 percent seen between 2000 and 2011. In fact, when examined by quarters, only 10 three-month periods since the beginning of 2000 have actually seen rates of less than 0.9 percent.

The expected increase is likely to come for two reasons, the report said. These cards give consumers a bit of financial flexibility when they are strapped for cash, and they continue to rely on their credit cards more heavily thanks to the stubbornly high unemployment rate, which is improving only slowly. Further, lenders are still continuing to open credit availability to more subprime borrowers who pose a higher risk; issuing of these accounts rose to 29.55 percent of all new cards in the second quarter of 2012, up from 23.86 percent in the same period in 2010.

Further, average debt on those cards is expected to climb as high as $5,446 per borrower by the end of next year, the highest level observed since 2009, but still down from the all-time peak of $5,776 in the first quarter of that year, the report said. By contrast, it's believed average debt will only stand at $5,050 by the end of this year.

For consumers struggling with late payments and other credit missteps, it might be a good idea to order copies of their credit reports, and potentially work with a credit repair company, which may allow them to clear up any unfair markings that mar their standings.