Some 6 million Americans will have bankruptcies removed from their credit scores within the next half decade, according to a report by Barclay’s PLC.
Americans credit scores notched a record high this spring in conjunction with a decline in the share of U.S. consumers that are deemed to be high-risk borrower, The Wall Street Journal reports.
The average credit score hit 700 in April, marking the highest national credit score average since 2005. The number of consumers deemed to be the riskiest borrowers — those with a credit score below 600 — comprise just 20 percent of borrowers, down from 25.5 percent in 2010.
Rising credit scores and improved risk pools for lenders are likely reflections of the improving state of the U.S. economy, and a sign that consumers are steadily recovering from the housing crisis of 2007.
Improving consumer outlooks, a falling unemployment rate and steady annual 2 percent economic growth will likely have lenders considering doling out more credit at cheaper costs, as consumers are more and more likely to pay back every dollar they borrowed with interest.
One aspect of the U.S. economy may cause banks and lending institutions to question whether offering more credit is a good idea: household debt. (RELATED: US Household Debt Hits Record High)
U.S. household debt in the first quarter of 2017 topped levels reached during 2008’s Great Recession.
The total debt held by U.S. households grew to $12.73 trillion in the first three months of 2017, $50 billion above the previous peak in 2008, according to a report released in mid-May by the New York Federal Reserve Bank. The figure isn’t adjusted for inflation or population size.
Officials at the New York Fed said that while the figure is at historic levels, there is no reason to panic.
“This record debt level is neither a reason to celebrate nor a cause for alarm. But it does provide an opportune moment to consider debt performance,” research officer Donghoon Lee said in a statement. “While most delinquency flows have improved markedly since the Great Recession and remain low overall, there are divergent trends among debt types.”
As a share of the U.S. economy, household debt is still smaller than 2008 levels. Household debt is equivalent to 67 percent of the economy in 2017, compared to 85 percent in 2008.
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