With an uptick in delinquencies, TransUnion LLC's Credit Risk Index is up 2.3% to 123.36 in the fourth quarter of 2011, the first increase since the fourth quarter of 2009.
“Increases in borrower delinquencies certainly played a role with this reported rise, with delinquency rates on credit cards and mortgages both slightly rising in the fourth quarter," says Charlie Wise, director of research and consulting at TransUnion. "Since past behavior is indicative of future performance, the uptick in delinquency leads to a higher risk forecast."
The increase in the percentage of nonprime consumers with an active bankcard may have also contributed.
"As lenders make credit more widely available at the riskier end of the credit spectrum, it is inevitable that the risk of default will increase for the population on average," Wise says.
TransUnion also noted last quarter that a steady decline in the index was beginning to level off.
The index measures the risk inherent in the U.S. credit-using population. A higher number means a higher level of credit risk.
Increases generally are expected during the last three months of the year because of holiday shopping, according to TransUnion. While that effect is short term, an increase in credit utilization can indicate higher risk, which is consequently reflected in index.
The year-over-year comparison, which takes seasonality out of the equation, shows a decrease in overall risk.
South Carolina had the highest index at 156.13, followed by Nevada at 155.95 and Mississippi at 155.48. North Dakota had the lowest at 77.37, followed by Minnesota at 87.22.
Quarter over quarter, credit risk appears to have increased seasonally in 47 states and the District of Columbia. Only Alaska, North Carolina and Utah experienced a decline in risk from the previous quarter.
On a related note, demand for consumer credit showed an increase of 6% in Q4 2011 from the same period a year ago, according to TransUnion’s Total Inquiry Index. While that increase was the largest since Q2 2007, consumer demand for credit is still well below levels experienced before the recession.
Even so, the increase in consumer-initiated inquiries for credit may be a signal that consumers are beginning to increase their spending on discretionary items and may reflect stronger consumer sentiment and confidence toward the U.S. economy, according to TransUnion.
