CHICAGO, IL--(Marketwire - Nov 28, 2011) - TransUnion's proprietary Credit Risk Index (CRI) declined for the seventh consecutive quarter as consumers continue to pay off their outstanding debt and maintain relatively lower delinquency levels on most of their credit obligations. Compared to one year ago, the CRI for the U.S. decreased 4.9 percent to 120.62.
"The lengthy, broad and steady decline in the Credit Risk Index, which reflects declines in consumer delinquency and debt levels, is beginning to show signs of a potential slow down," said Chet Wiermanski, global chief scientist at TransUnion. "Recent small increases in consumer delinquency across all major categories coupled with slight increases in the use of existing credit cards and demand for new credit may contribute to a deceleration in the decline of the CRI over the next several quarters."
According to TransUnion's Trend Data, for the past several quarters there has been increased lending activity among banks and finance companies across several revolving and installment loan categories. "Increases in the percentage of consumers with new accounts with generally higher credit limits, coupled with lower utilization rates for revolving account types reflect a healthier balance of risk," continued Wiermanski.
The 61 basis point quarterly decrease (120.62 from 121.22) at the national level was the smallest decline since the Q4 2009 CRI peak began to decline. This decline places the CRI at a level not witnessed in the U.S. since the third quarter of 2008. The Index has declined by 905 basis points or 6.98 percent since reaching its peak of 129.67 during the fourth quarter of 2009.
With regards to demand for consumer credit measured by TransUnion's Total Inquiry Index (TII), the Q3 2011 index increased 0.7 percent from the previous year. Although the change in the TII indicated that demand for total credit remains low, compared to 2000 benchmark levels, an annual increase of 10 percent for auto credit during the third quarter of 2011 is encouraging.
"Lenders are making new credit available to an increasing percentage of consumers, who in turn, are conservative with their use of it," said Wiermanski. "Continued responsible use and repayment of credit by consumers during the rest of 2011 should modestly improve the CRI to levels witnessed just prior to the early stages of the credit and mortgage crisis," added Wiermanski.
Q3 2011 CRI Statistics
- As credit risk within the U.S. continues to decline, the decline appears to be approaching a trough as only 38 states in Q3 2011 experienced a decline in credit risk compared to 48 states during the two previous quarters. The 13 states experiencing an increase in their CRI tended to be concentrated in the Midwest, which historically have lower credit risk levels.
- Despite experiencing small declines in their CRI, Mississippi (155.04) has the highest CRI, followed by Nevada (152.99) and South Carolina (151.24).
- States with the lowest Credit Risk Index continue to be concentrated in Upper Midwest and New England where eight of the 10 lowest CRIs exist. The three states with the lowest CRIs are North Dakota (75.34), Minnesota (85.22) and South Dakota (89.56).
TransUnion's Trend Data Database
The source of the underlying data used for this analysis is TransUnion's Trend Data, a one-of-a-kind database consisting of 27 million anonymous consumer records randomly sampled every quarter from TransUnion's national consumer credit database. Each record contains more than 200 credit variables that illustrate consumer credit usage and performance. Since 1992, TransUnion has been aggregating this information at the county, Metropolitan Statistical Area (MSA), state and national levels.
As a global leader in information and risk management, TransUnion creates advantages for millions of people around the world by gathering, analyzing and delivering information. For businesses, TransUnion helps improve efficiency, manage risk, reduce costs and increase revenue by delivering high quality data, and integrating advanced analytics and enhanced decision-making capabilities. For consumers, TransUnion provides the tools, resources and education to help manage their credit health and achieve their financial goals. Through these and other efforts, TransUnion is working to build stronger economies worldwide. Founded in 1968 and headquartered in Chicago, TransUnion reaches businesses and consumers in 23 countries around the world. www.transunion.com/business