Key credit delinquency index surges 24% over past year

Credit delinquency in South Korea has surged over the past year, mainly due to deterioration in household debts and job market conditions, an industry report showed Sunday.

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 numbers translate into more people unable to pay back 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. People in this category are effectively incapable of carrying out normal economic and social activities.

The Korea Credit Bureau (KCB), a domestic evaluation firm, said 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 KCB since the 458,000 reached 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 the previous year.

The bureau added 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 in quality of work caused by the economic slowdown and mounting household debt.

The government predicted South Korea's economy will grow just 3.3 percent in 2012, down from 3.6 percent last year. (Yonhap)