Loan default rate keeps on climbingCredit delinquency in Korea has surged over the past year, mainly due to a deterioration of household debt and worse job market conditions, an industry report showed yesterday.
According to credit information service provider Nice, its index of new credit delinquency rose to 20.80 as of March from 16.83 in April of 2011, a rise of 23.6 percent.
The index is based on the number of people who newly default on loans. Higher number translates into more people unable to pay back their interest or principal.
The latest finding also showed the default rate for people with the lowest credit rating rising to its highest level since the global financial crisis.
The Korea Credit Bureau (KCB), a domestic evaluation firm, said that as of late 2010, there were 333,000 people categorized as having the lowest credit rating, but that number reached 405,000 in May.
This is the highest reported by the KCB since it reached 458,000 in late 2009, when the country was struggling to cope with the worldwide financial crisis brought on by the collapse of U.S. investment giant Lehman Brothers in the previous year.
The bureau added that the lowest rating made up 1 percent of the 10-tiered rating scheme, up from 0.84 percent at the end of the 2010.
Industry sources said the sharp rise is directly linked to a deterioration of the quality of work caused by the economic slowdown and mounting household debt.
The government predicted the domestic economy will grow just 3.3 percent in 2012, down from 3.6 percent last year.
The country’s household debt has risen to 922 trillion won ($812 billion), putting a considerable strain on the general public.
Reflecting the mounting stress, the share of defaults reported by credit card companies rose by an average of 25 percent this year from 2011, while the corresponding figures for savings banks and mutual savings hit 18 percent and 6 percent, respectively.