For the fourth consecutive quarter, TransUnion’s Credit Risk Index declined, indicating consumers were less of a credit risk in 2010 compared with the previous year, the Chicago-based credit bureau reports.
The index decreased118 points in the fourth quarter ended Dec. 31, to 125.61 from 126.79 the previous quarter, pushing down risk to a level not experienced in the U.S. since the fourth quarter of 2008.
Forty-nine states and the District of Columbia experienced declines in their credit-risk indices by the end of December, a sign that a broad improvement in consumer credit conditions is taking root.
The ranking of states with the highest index figures remained unchanged from the previous quarter, with Nevada (162.09) slightly ahead of Mississippi (160.33) and Texas (157.65). Also in line with previous quarters, the least-risky states were concentrated in the Upper Midwest, with North Dakota coming in at 79.76 and Minnesota at 88.96.
“The gradual decline in the [index], coupled with a 5.4% decrease in the demand for credit over the previous year, as reflected in TransUnion’s Total Inquiry Index, suggests that consumers are relying more on existing credit or switching to cash or debit cards,” says Chet Wiermanski, TransUnion global chief scientist. “While more consumers will have stronger credit profiles, making them attractive to credit marketers, the underlying demand for credit appears to still be soft."
The Inquiry Index decreased to 67.6 in the fourth quarter. This is significant because the decline in the demand for credit slowed to 5.7% between Q4 2009 and Q4 2010 after experiencing declines of 19.3% between Q4 2008 and Q4 2009 and 16.5% between Q4 2007 and Q4 2008, according to TransUnion. The Inquiry Index is benchmarked to credit-inquiry levels generated by consumers seeking credit in 2000.
The Inquiry Index declined in 42 states and the District of Columbia during the fourth quarter. Alaska, Vermont and Wyoming were the top three states showing the greatest quarterly jump in credit demand. Florida, Nevada, and Virginia were the top three states showing the greatest decrease.
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