TransUnion: Credit Risk and Demand Drop at Conclusion of 2010

TransUnion’s proprietary Credit Risk Index (CRI) declined for the fourth consecutive quarter indicating that U.S. consumers are less of a credit risk than in previous quarters. The CRI for the United States decreased 0.9 percent in the fourth quarter of 2010 and now stands at 125.61. At a national level the CRI dropped 118 basis points (125.61 from 126.79), pushing it to a risk level not witnessed in the U.S. since the fourth quarter of 2008.

Credit demand as measured by TransUnion’s Total Inquiry Index (TII) decreased to 67.6 in the fourth quarter of 2010. This is significant because the decline in the demand for credit has slowed to 5.7 percent (between Q4 2009 and Q4 2010) after experiencing declines of 16.5 percent (between Q4 2007 and Q4 2008) and 19.3 percent (between Q4 2008 and Q4 2009). The TII is benchmarked to credit inquiry levels generated by consumers seeking credit in 2000.

Q4 2010 CRI/TII Statistics

• On a year-over-year basis, the CRI now stands 3.13 percent lower than it did at the end of the fourth quarter of 2009.
• At the end of the fourth quarter of 2010, 49 states and the District of Columbia experienced declines in their respective credit risk indices, signaling that a broad improvement in consumer credit conditions is taking root.
• Only Wisconsin experienced a CRI increase during the fourth quarter of 2010. However, it is important to note that Wisconsin’s CRI of 111.61 is well below the national average.
• On a state basis, the order of states with the highest Credit Risk Index remained the same with Nevada (162.09) slightly ahead of Mississippi (160.33) and Texas (157.65). Consistent with previous quarters, the least risky states are concentrated in the Upper Midwest, with North Dakota coming in at 79.76 and Minnesota at 88.96.
• The TII declined in 42 states and the District of Columbia during the fourth quarter of 2010.
• The top three states showing the greatest quarterly increase in credit demand as measured by the TII were Alaska, Vermont and Wyoming. The top three states showing the greatest decrease in credit demand were Florida, Nevada, and Virginia.

Analysis

“The gradual decline in the Credit Risk Index, coupled with a 5.4 percent 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,” said Chet Wiermanski, global chief scientist at TransUnion. “While more consumers will have stronger credit profiles making them attractive to credit marketers, the underlying demand for credit appears to still be soft.”

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. www.transunion.com/trenddata

About TransUnion
As a global leader in credit and information 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 comprehensive data and advanced analytics and decisioning. 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 employs associates in more than 25 countries on five continents. www.transunion.com/business