Fact Checked

U.S. household debt continues to rise

Young woman at home looking at a billing statement Image: Young woman at home looking at a billing statement

Editorial Note: Credit Karma receives compensation from third-party advertisers, but that doesn’t affect our editors’ opinions. Our marketing partners don’t review, approve or endorse our editorial content. It’s accurate to the best of our knowledge when posted. Availability of products, features and discounts may vary by state or territory. Read our Editorial Guidelines to learn more about our team.
Advertiser Disclosure

We think it's important for you to understand how we make money. It's pretty simple, actually. The offers for financial products you see on our platform come from companies who pay us. The money we make helps us give you access to free credit scores and reports and helps us create our other great tools and educational materials.

Compensation may factor into how and where products appear on our platform (and in what order). But since we generally make money when you find an offer you like and get, we try to show you offers we think are a good match for you. That's why we provide features like your Approval Odds and savings estimates.

Of course, the offers on our platform don't represent all financial products out there, but our goal is to show you as many great options as we can.

Total U.S. household debt increased by $193 billion — a 1.4 percentage point increase — to $14.15 trillion in the fourth quarter of 2019, according to latest Federal Reserve Bank of New York data.

Debt levels have been steadily rising for more than five years. And within the last few months of 2019, some types of debt saw marked increases.

  • Mortgage debt (the largest contributor to household debt) rose $120 billion to $9.56 trillion
  • Auto loan debt rose $16 billion to $1.33 trillion
  • Credit card debt was up $46 billion to $930 billion

This fourth-quarter data also revealed that U.S. consumer delinquencies, or the percentage of people who couldn’t repay their loans, rose compared to the third quarter.

Want to know more?

What’s going on with U.S. household debt?

There were a few other notable changes in the report.

  • Due to an increase in mortgage refinancing, originations rose by 42% within the fourth quarter of 2019 to $752 billion — the highest level since the fourth quarter of 2005.
  • New mortgage borrowers have maintained strong credit, with a median credit score of 770 — a five-point increase from the third quarter of 2019.
  • Student loan debt rose $10 billion from the third quarter of 2019 to $1.51 trillion within the fourth quarter of 2019.

Why does this matter?

Banks are concerned with borrowers’ ability to repay debt and are tightening some lending standards — especially for credit cards and auto loans, according to recent responses from a Federal Reserve Bank of New York survey of senior loan officers.

Lenders expressed concerns about how most types of loans might perform in 2020 — and extending credit to borrowers they don’t consider to have prime credit.

Still, the economy is doing fairly well by other measures. In its latest statement released in January this year, the Federal Reserve noted that economic activity is growing at a “moderate” rate and job growth has been “solid” within recent months.

What can you do?

Based on the latest data on U.S. household debt and news that banks have begun tightening lending standards for certain forms of credit, it might be more difficult for some to get a credit card or auto loan within the next few months.

Before applying for a credit card or auto loan, it’s wise to …

  • Understand your credit scores. Learning what factors impact your credit scores can help you address your habits and work on building your credit.
  • Keep a budget. Understanding your income and debt by creating a budget may help you figure out how to reach your financial goals.

About the author: Paris Ward is a content strategist at Credit Karma, providing readers with the latest news that will aid their financial progress. She has more than a decade of experience as a writer an… Read more.