Household wealth falls to lowest levels since end of 2008

While there have been some indications the economy is improving, a new report suggests Americans are still in recovery mode.

According to the Federal Reserve, household income levels diminished significantly during the third quarter of last year, suffering their biggest drop in nearly three years.

Overall, household income dipped by $2.2 trillion to $57.4 trillion, or what translates to a loss of more than 4 percent. That's the most significant decline in household earnings since the fourth quarter of 2008, which was at the height of the financial crisis.

On the positive side, the report also found that household debt levels fell at an annual rate of 1.25 percent in the third quarter compared to the previous period, mainly as a result of a decline in mortgage debt.

However, The Associated Press reports the drop is not necessarily reflective of people paying off their loans but more so an indication that people are losing their homes to foreclosure after missing their payments.

One of the most important factors in establishing a clean credit history is regularly making payments on time, as it's an indication to lenders that consumers are financially responsible.