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Despite Increased Borrowing and Demand Credit Risk Declines

by devteam September 18th, 2012 | Share

After increasing for two quartersrnTransUnion’s Credit Risk Index (CRI) ratcheted back down in the second quarterrnof 2012 to about the same place it was one year earlier.  The CRI is a measure of risk inherent in thernU.S. credit-using population; the higher the index, the higher the level of risk.</p

The index decreased 1.57 percent fromrn123.98 in the first quarter to 122.03 in the second.  On a year-over-year basis the CRI was up 0.66rnpercent, a difference TransUnion called “nominal.”   The CRI is 7.6 points lower than its 129.67rnpeak in Q4 2009 and is now below Q4 2008 when it started its accelerationrntoward historic levels.</p

“After upticks in the prior twornquarters, it was good to see the credit risk level decline this quarter tornroughly the same level it was last year,” said Charlie Wise, director ofrnresearch and consulting in TransUnion’s financial services businessrnunit. “Delinquency rates for major loan types have all declined inrnthe first half of 2012, and that contributed to the drop in the risk index inrnthe second quarter.” </p

Demand for credit increased substantiallyrnfrom Q1 2011 to the most recent period. rnThe 21.4 percent increase in consumer inquiries brought TransUnion’srnTotal Inquiry Index (TII) to its highest level since the third quarter of 2007 -rnpredating the recent recession. rnTrans-Union said this may be a signal that consumers are beginning tornincrease their spending on discretionary and large-ticket purchases, reflectingrnan improvement in consumer sentiment and confidence.</p

TransUnion issues a separate reportrnon delinquencies but said today that the improvements in delinquency rates forrnmajor consumer loans types have offset moderate increases in consumer borrowingrnover the past year including increases in auto loan and credit cardrnbalances.  Wise said he was pleased tornsee that, despite increases in these two types of borrowing, consumers arernmaintaining consistent payment behavior on those loans as well as onrnmortgages.   </p

Credit risk declined on arnquarter-over-quarter basis in all 50 states although the District of Columbia hadrnan increase of 0.98 percent.  Fifteenrnstates had an annual decrease in risk including three of the five most populousrnstates, Illinois (-3.28 percent), California (-1.39 percent), and Texas (-0.40rnpercent.)  Risk increased in New Yorkrn(2.57 percent) and Florida (0.93 percent).

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About the Author

devteam

Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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