Persons who borrowed during and after the COVID War are now falling behind in their payments “at unusually high rates,” according to the Financial Times.

Four percent of credit card accounts opened in this year’s first quarter are now delinquent. In September 2022, the year-to-date rate was 4.5 percent. 

Both rates are the highest for their periods since 2008, Moody’s Analytics said.

“Performance of consumers with older credit cards is returning to pre-COVID levels but, for new credit cards, delinquencies are exceeding 2018 and 2019 levels,” Rikard Bandebo, chief product offer for VantageScore, a credit rating firm, told the FT.

Credit cards issued in March 2022 have a higher rate of late payments than cards issued in March during the previous four years, a VantageScore study found.

Car loans taken out during the COVID era by people with subprime credit scores are showing twice the rate of late payments than in previous years, S&P Global Ratings reported.

“Lenders were rather aggressive during that period,” S&P analyst Amy Martin said.

Through late 2022, there had been “hundreds of billions of dollars in excess lending based upon artificially inflated credit scores,” according to an investigation by research firm BankRegData.

TRENDPOST: A growing number of mortgage loans also are in trouble. See “Home Foreclosures Increase 28 Percent in Third Quarter” in this issue.

Money the government lavished on consumers during the COVID War led to a collusion between lenders and borrowers: lenders stretched their criteria so they could book loans during an economic downturn and consumers showed temporarily higher incomes or bank balances than they usually had because of federal gifts.

The result: more debt, more bad loans, and a deeper contraction of economic activity than there would be otherwise.