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TransUnion: U.S. Credit Risk Declines From Last Quarter Despite Increases in Consumer Borrowing

CHICAGO, IL--(Marketwire - Sep 18, 2012) - TransUnion's proprietary Credit Risk Index (CRI), a measure of the risk inherent in the U.S. credit-using population, decreased in Q2 2012, reversing the increases seen in the prior two quarters. Quarter over quarter, the Q2 2012 CRI for the U.S. decreased 1.57% from 123.98 to 122.03. On a year-over-year basis, the CRI had a nominal 0.66% increase. A higher index indicates a higher level of credit risk.

"After upticks in the prior two quarters, it was good to see the credit risk level decline this quarter to roughly the same level it was last year," said Charlie Wise, director of research and consulting in TransUnion's financial services business unit. "Delinquency rates for major loan types have all declined in the first half of 2012, and that contributed to the drop in the risk index in the second quarter."

On a related note, demand for consumer credit showed an increase of 21.4 percent in Q2 2012 from the same period a year ago, as measured by TransUnion's Total Inquiry Index (TII). This increase brought the TII to the highest quarterly level since Q3 2007, which was before the start of the past recession.

"The increase in consumer-initiated inquiries indicates stronger consumer demand for credit, and may be a signal that consumers are beginning to increase their spending on discretionary items and larger-ticket purchases, reflecting stronger consumer sentiment and confidence toward the U.S. economy," said Wise. 

As TransUnion has been reporting, delinquency rates for major consumer loan types, including bankcard, auto, and mortgage, all declined on a quarter-over-quarter basis in each of the first two quarters of 2012. Further, delinquency rates for each of these loan types remained flat or declined year-over-year from Q2 2011 to Q2 2012. These improvements in loan delinquency rates have offset moderate increases in consumer borrowing over the past year, including increases in auto loan balances and increases in the average bankcard balance per consumer. 

"Consumers have stepped up their borrowing over the past year, particularly in bankcards and auto loans. New card and auto loan originations have both grown over the past year, and average balances per consumer for both these loan types increased between Q2 2011 and Q2 2012. Despite those increases, we are pleased to see that delinquency rates have remained flat or declined. Consumers are maintaining consistent payment behavior on their bankcards and auto loans, as well as on mortgages, which is the key reason why the U.S. Credit Risk Index has remained flat over the past year," continued Wise.

Q2 2012 CRI Statistics

  • At 122.03, the TransUnion CRI is 7.6 points lower than its peak in Q4 2009 (129.67). Credit risk within the U.S. is now below the level measured in Q4 2008 (124.79), which at that time was beginning to accelerate toward historic levels.

  • Year over year, 15 states experienced a decrease in credit risk. Of the five most populous states, three saw year-over-year CRI declines, including Illinois (-3.28%, to 117.21), California (-1.39%, to 118.94) and Texas (-0.40%, to 151.95). The other two saw year-over-year CRI increases, with New York up 2.57%, to 107.87 and Florida up 0.93%, to 143.25.

  • Quarter over quarter, all 50 states saw a decrease in credit risk; only the District of Columbia experienced an increase (+ 0.98%). Illinois had the largest quarter over quarter decrease, dropping 6.53% to 117.21. Last quarter, 31 states plus the District of Columbia experienced a quarter-over-quarter increase..

  • Of the four states generally considered hardest hit by the recent recession, three experienced year-over-year declines in CRI, including California (-1.39%), Nevada (-1.15%) and Arizona (-0.86%). Only Florida (+ 0.93%) saw an increase. 

  • Nevada (152.95), South Carolina (152.69), Mississippi (152.69), Texas (151.95) and Georgia (149.65) had the highest CRI in Q2 2012.

  • States with the lowest CRI continue to be concentrated in the Upper Midwest and New England regions. The states with the lowest CRI's are North Dakota (76.90), Minnesota (86.29) and South Dakota (89.19).

  • The states with the highest year-over-year decrease in CRI were South Dakota (-3.99%), Illinois (-3.28%) and Mississippi (-1.96%).

  • The states with the highest year-over-year increase in CRI include Iowa (3.10%), West Virginia (3.04%), and Massachusetts (2.97%).

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.


About TransUnion 

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 32 countries around the world. For more information, visit www.transunion.com.