First Drop in TransUnion Credit Risk Index Since 2008 Signals Improved Consumer Credit Risk Conditions
CHICAGO, IL--(Marketwire - May 5, 2010) - TransUnion's Credit Risk Index (CRI) declined during the first quarter of 2010 after five successive quarterly increases, signaling that consumer credit risk conditions in the U.S. are beginning to improve. The Credit Risk Index is a statistic developed to measure changes in average consumer credit risk within various geographies across the nation.
TransUnion's Credit Risk Index decreased nationally 85 basis points to 128.82 from 129.67 during the first quarter of 2010, the first decline of this measure since the third quarter of 2008 -- the early stages of the current recession.
"Based upon the Credit Risk Index it appears that we are finally beginning to see improvement within the consumer credit economy and possibly the beginning of an economic recovery," said Chet Wiermanski, global chief scientist at TransUnion.
TransUnion Credit Risk Index - Statistics
After reaching an all-time high at the national level the Credit Risk Index's percent decrease of 0.65 percent was relatively small compared to previous times when the national index declined. "It is not out of the ordinary to see the credit risk index decline 1 or 2 percent on a quarterly basis, but the direction of the change is what matters at this point in time," said Wiermanski.
On a year-over-year basis, the Credit Risk Index stood 1.23 percent higher than it did at the end of the first quarter of 2009; however, at the end of the first quarter in 2010, 43 states and the District of Columbia experienced declines in their credit risk indices signaling that a broad improvement in consumer credit conditions is finally taking root. Four New England states (Connecticut, New Hampshire, Rhode Island and Vermont) along with Montana, Utah and Wisconsin experienced slight increases in the credit index.
On a state basis, the order of states with the highest Credit Risk Index did not change with Mississippi having the highest Credit Risk Index at 167.46, followed closely by Nevada (166.26) and Texas (163.09). Continuing from the previous quarters, the least risky states are predominately concentrated in New England and the Upper Midwest areas of the country, with North Dakota coming in at 82.51, Minnesota at 91.14 and Vermont at 93.54. North Dakota, the District of Columbia and South Dakota experienced Credit Risk Index declines of 2 percent or more.
"We are cautiously optimistic that the Credit Risk Index will continue to experience small declines as consumers keep reducing their debt burden and remain current on their existing credit obligations," said Wiermanski. "After experiencing one of the most tumultuous economic periods since the Great Depression, it is possible that consumers may be reluctant to take on significant debt in the near future, which could possibly temper an economic recovery."
The Credit Risk Index is defined as the weighted average probability of 90-day delinquency or worse among consumers in a given region relative to the nation as a whole. The Credit Risk Index uses the fourth quarter of 1998 as a baseline for comparison. Therefore, it measures changes in consumer credit score distributions relative to the national distribution and delinquency rates as a whole at the end of 1998.
TransUnion considered 1998 as a representative year of credit performance within the usual dynamic of the historical credit cycle. A value of more than 100 represents a higher level of relative risk. For comparison purposes, the Credit Risk Index in recent years has generally ranged between 110 and 120, experiencing a one- or two-point shift between quarters.
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 credit and information 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 comprehensive data and advanced analytics and decisioning. 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 employs associates in more than 25 countries on five continents. www.transunion.com/business
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