TransUnion Credit Risk Index Plateaus, Suggesting Improved Consumer Risk Conditions for the U.S.
CHICAGO, IL--(Marketwire - March 16, 2010) - TransUnion reported that during the fourth quarter of 2009 the Credit Risk Index (CRI) indicated that risk conditions in the U.S. are beginning to moderate. The Credit Risk Index is a statistic developed to measure the changes in average consumer credit risk within various geographies across the nation.
During the fourth quarter of 2009, TransUnion's Credit Risk Index increased nationally 38 basis points to 129.67 from 129.29 in the third quarter, the smallest increase of this measure since the early stages of the current recession.
"Based upon the Credit Risk Index it appears that we may have possibly reached a plateau for credit risk after five consecutive quarters of significant increases, suggesting that the financial recovery is beginning to take hold as consumers continue to adapt their lifestyle and debt management practices to navigate these difficult economic times," said Chet Wiermanski, global chief scientist at TransUnion.
TransUnion Credit Risk Index - Statistics
Although the Credit Risk Index continued its climb reaching an all-time high at the national level for the fifth consecutive quarter; the growth rate continued to decelerate, as 10 states, predominately located east of the Mississippi river (Alabama, Tennessee, Illinois, Kentucky, District of Columbia, Rhode Island, Vermont, Maine, Alaska, and North Carolina) experienced quarterly declines.
The rate of increase between the third and fourth quarters for the Credit Risk Index was the lowest since the end of 2008, when the nation experienced a 2.61 percent decline from 120.89 to 117.74. On a year-over-year basis, the Credit Risk Index increased 3.92 percent (from 124.79 in the fourth quarter of 2008).
On a state basis, Mississippi continues to rank as the riskiest state, from a credit risk perspective, with a Credit Risk Index of 169.22. It is followed closely by Nevada (167.19) and Texas (164.23). Continuing from the previous quarters, the least risky states are concentrated in New England and the Upper Midwest areas of the country, with North Dakota coming in at 84.76, Minnesota at 91.50 and Vermont at 92.97.
"We anticipate the Credit Risk Index will remain flat as consumers continue to take on less bank card debt and as employment conditions improve," said Wiermanski. "The prospect of a decrease in the Credit Risk Index for the first time in more than two years possibly as early as the end of 2010 continues to improve as the economic recovery expands to a greater number of states in the coming months."
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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