Unemployed slipping through cracks in the credit system
For years, the rate of credit card balances that lenders have written off as being uncollectable has always followed closely in line with the national unemployment rate. But that isn’t happening any more.
According to a report in the Wall Street Journal, the number of writeoffs have dropped considerably while unemployment has hovered around the same high number for a few months. Many lenders have reported big drops in the rate of writeoffs, and some even say their total has dropped about half a percentage point between April and May, but still the unemployment rate has hung in between 9.5 and 9.7 percent.
The reason, the paper said, is that some unemployed Americans have been without a job for so long that they’re just no longer in the credit system and don’t count toward the reported numbers.
A recent report from the San Francisco Chronicle said that about 60 percent of employers check applicants’ credit report before considering them for a job, and if the report shows negative information, the unemployed person is unlikely to be hired, creating a vicious Catch-22.