NEW YORK - U.S. credit card defaults declined in July after five straight months of record highs, suggesting the ability of cardholders to pay bills could be stabilizing, Fitch Ratings said on Monday.

Fitch's prime credit card chargeoff index, which measures the portion of credit card securitized loans that companies do not expect to be repaid, fell to 10.55 percent in July from 10.79 percent in June.

In addition, Fitch's delinquency index, an indicator of future defaults, fell to 4.26 percent from 4.31 percent.

Still, credit card defaults are above July 2008 levels by 63 percent, while delinquencies are up 40 percent.

We still need to see some measurable improvement in the delinquency and personal bankruptcy figures and the employment situation overall before chargeoffs revert to more historical norms, Managing Director Michael Dean said in a statement.

For now, we expect chargeoffs to moderate at these elevated levels in the coming months, he said.

Fitch added that although chargeoffs usually increase in the fourth quarter, it seems less likely this year as delinquencies have exhibited stability for six months now.

While early estimates forecast the charge-off rate could spike at an average of 12 percent to 14 percent, some analysts now say defaults could top out at 11 percent to 12 percent on average.

Credit card defaults usually track unemployment, which is expected to peak at more than 10 percent by year-end. It was at 9.4 percent in July. (Reporting by Juan Lagorio; Editing by Lisa Von Ahn)

Fall