TransUnion's Credit Risk Index (CRI) declined in the first quarter after five straight quarterly increases, indicating that consumer credit risk conditions in the U.S. are improving.

The CRI measures changes in average consumer credit risk within various geographies across the nation. It decreased 85 basis points to 128.82 from 129.67 during the first quarter ended March 31, the first decline since the third quarter of 2008 - the early stages of the recession.

"It appears that we are finally beginning to see improvement within the consumer credit economy and possibly the beginning of an economic recovery," says Chet Wiermanski, global chief scientist at TransUnion. "We are cautiously optimistic that [the CRI] will continue to experience small declines as consumers keep reducing their debt burden and remain current on their existing credit obligations.

"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," he says.

After reaching an all-time high at the national level the CRI's decrease of 0.65% was relatively small compared to previous times when the national index declined. On a year-over-year basis, the CRI stood 1.23% higher than it did at the end of the first quarter of 2009. However, at the end of the first quarter, 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 CRI did not change with Mississippi topping that list at 167.46, followed 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 CRI declines of 2% or more.

The CRI 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. It 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 CRI in recent years has generally ranged between 110 and 120, experiencing a one- or two-point shift between quarters.

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.

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