The financial health of South Korean households has deteriorated for a third consecutive year, with the default rate in the low-rated group rising fast amid an economic slowdown, data showed Monday.

An index measuring households’ credit soundness came to 99.73 in the January-June period, compared with 101.12 and 100.49 tallied in 2010 and 2011, respectively, according to the Korea Credit Bureau, a local credit appraiser.

The assessment of household’s financial health by the KCB is based on related data by local financial institutions including the central bank and the regulatory body. A number of 100 or below indicates the level of soundness is below adequate.

Separate data compiled by the NICE Information Service, another credit service provider here, showed that the number of the low-rated borrowers in Korea reached 6.03 million, accounting for 14.4 percent of the total.

Credit analysts noted that although the total number of borrowers with low ratings edged down this year from the end of last year, the borrowers’ default rate has gained in almost every credit-rating bracket.

The default rate, which refers to the portion of insolvent borrowers or those with overdue repayments for more than three months, averaged 2.21 percent in the first half, up 0.26 percentage point from the previous year, the NICE data showed.

The corresponding figures for low-rated groups came as high as 10-35 percent, reflecting that the quality of household indebtedness is worsening, analysts said.

“The economic slowdown has put more burden on the financially-vulnerable like the self-employed. We need to reduce the household debt by taking bold measures for insolvent debtors,” said Byun Yang-gyun, an economist from the Korea Economic Research Institute.

The country’s household debt reached a record 922 trillion won ($845 billion) as of the end of June, tantamount to about 74 percent of its gross domestic product for 2011. 

(Yonhap News)