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At that point, banks will have to start rejecting a whole lot more loans, and the credit cycle will get a whole lot uglier as a result. There are also questions about who is actually funding these credit protection schemes, but those will be saved for a later time.
The Federal Reserve's Household Debt and Credit Report
The headline from the Federal Reserve's household debt and credit report for the third quarter of 2024 was that the total delinquent balance on all household debt shot up to 3.5%, up from 3.2% in the first and second quarters. The credit cycle began to shift in 2023, with the delinquency rate ticking up from around 2.5% in the fourth quarter of 2022 to 2.6% in the first half of 2023, and then accelerating in the second half of the year as unemployment began to rise.