The financial health of South Korean households has deteriorated as the default rate has been on a steady rise, showed a recent data.
An index measuring households` credit soundness fell below the baseline of 100 after declining three years in a row, according to the local credit rating agency Korea Credit Bureau (KCB) Monday.
The index, solely developed by the KCB based on its credit rating analysis and government’s economic indicators, was averaged at 99.73 during the period of January-June this year.
The index has been on a constant drop from 101.12 in 2010 and 100.49 in 2011, eventually dropping below the baseline of 100. This signals the financial health of Korean households, seeing a constant deterioration, has been on an alert level.
The problem is a rise in default rate was observed in all including those with lower-credit ratings.
Default rate refers to the share of borrowers in default for a year who were reported to the Korea Federation of Banks or those who fail to repay their principal and interest for more than three months.
The share of borrowers who defaulted for a year from September last year grew 0.26 percentage points from a year ago to 2.21 percent, according to the Nice Credit Information Service.
The share of people with a credit rating of seven jumped from 5.44 percent to 7.12 percent, those with a credit rating of eight from 8.16 percent to 10.01 percent, those with a rating of nine from 12.41 percent to 13.39 percent and those with the lowest rating from 30.91 percent to 34.46 percent, showing that those with lower-credit ratings experienced higher default rates.
[Written by Youngduk-Bang - Jieun Lee / edited by Soyoung Chung]
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