Americans Jumping From One Debt to Another? Equifax Says Yes

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Let’s start with the good news. Americans have reduced overall mortgage debt by $1.5 trillion since the financial crisis! Considering the high cost of housing, it’s an impressive drop from previous years.

Now, onto the not so great news – consumer debt (including mortgage loans and credit card debt) increased for the third consecutive month. That means that while debt has gone down since 2008, it seems to be on the upswing again now. If borrowers are able to purchases homes again, that may be a positive thing. But the credit card debt could be a reason for concern. While increased consumer confidence is a reflection of the improving economy, we can all hope that consumers don’t overextend themselves with credit.

These stats cited above come straight from an Equifax report which tallied numbers from a pool of surveys and reports. They reflect the fourth quarter as well as year-end numbers. Collections & Credit Risk pared down the information into the “need to knows” including percentage of delinquent debt, total outstanding debt in various categories, and comparisons to previous quarters in the year.

Bottom line?

Seems that – on average – we’re recovering, floundering, flourishing, and/or taking on more consumer debt… all at the same time. It’s a familiar pattern that often emerges in quarterly reports. This is largely due to the wide range of consumer information that is highlighted and also just based on the fact that debt is complicated and personalized. Good news in one area doesn’t necessarily indicate good news in other areas.

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What this means for you

It’s best to take information released in these kinds of reports with a grain of salt. While the average debt in any of the polled areas may be increasing or decreasing (depending on a variety of contributing factors), that doesn’t mean that your financial circumstances will necessarily line up with the trends. For instance, maybe you just purchased a home and are newly faced with a mortgage. Or maybe you recently paid off a retail credit card. In general, the best way to respond to these averages is to take reports like these as a reminder to check in with your finances and refine your payoff plan.

Actions to take

Here are some things we should all do right now to make sure we are sticking with the plan we’ve set out for ourselves and continuing to work toward our goals:

1. Check in with your budget. Have you been spending the desired amount every month? Or have you been going over budget? If you have, look for ways to save money that will bring you under budget next month.

2. Make sure you’re not falling prey to sneaky tactics. We recently wrote about these underhanded measures that could be keeping you in debt – so be sure to read the article and protect yourself from these tactics.

3. Target your highest interest rate loan with 100% intense focus! As a reader of this blog, you know that paying off the highest interest rate loan is the fastest way to becoming debt free. So keep up the good work. And once you finish that account, set your sights on the next one.

4. Consider opting for bi-weekly payments in order to accelerate your repayment plan. This is a strategy that applies especially well to mortgages and student loans because it gets you to pay the equivalent of one full extra payment per year, but it doesn’t feel so hard because you’re simply paying a half of your monthly payment every two weeks.

5. Contact your bank to explore your options for saving and ask for a lower interest rate on your credit cards. This could help you keep a lot of money in your pocket.

6. Look for ways to increase your income to pay down your debt even faster. We all tend to have some abilities or interests that could be turned into a part-time side job. Check out the list above and see what might work for you.

Ultimately, when you keep an eye on your finances and take any precautionary measures or proactive fixes you stay in control of your finances.

For additional resources, visit our Credit Card Debt Resource Center and our Mortgage Resource Center.

Image Credit: TheBusyBrain

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