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21
CONSUMER CREDIT RISK DROPS TO LOWEST
LEVEL SINCE 2005
TransUnion released its Credit Risk Index,
which measures aggregate credit risk in the
nation. e report released in early March
concluded credit risk dropped at the end of 2013
to the lowest level since 2005.
e index dropped to 110.10 in the fourth
quarter of 2013, down nearly 9 percent from the
120.64 reading from Q 4 2012.
"e Credit Risk Index measures changes in
consumer credit score distributions relative to the
national distribution and delinquency rates as a
whole at the end of 1998," the release noted.
at year was chosen as "a representative year
of credit performance within the usual dynamic
of the historical credit cycle," according to the
report.
A value of more than 100 represents a higher
level of risk, and TransUnion remarked that the CRI
has generally ranged between 110 and 120 between
2001 and 2007, and saw elevated ranges between 120
and 130 during the most recent recession.
"With auto loan and credit card delinquency
levels hovering near all-time lows for the last two
years, and with mortgage delinquencies seeing
their biggest drop in 2013 since the housing
bubble, a decline in go-forward consumer
credit risk would be expected. However, it was
a pleasant surprise to see the Credit Risk Index
drop to levels not seen in nearly 10 years," said
Ezra Becker, VP of research and consulting for
TransUnion's financial services business unit.
e CRI peaked at the end of 2009 at 129.67,
15 percent higher than the current level.
"is improvement is driven by a myriad of
factors, including consumers better maintaining
their credit relationships and fewer subprime
and near-prime consumers opening new credit
accounts. With credit risk at such low levels,
there is a possibility that consumers in higher
risk segments may see more credit offers, as some
lenders decide they have the room in their profit
models to take on greater risk," Becker said.
States experiencing the greatest CRI
improvements in the last year include: California
(down 12.97 percent to 100.74); Nevada (down
12.94 percent to 130.85); Florida (down 12.17
percent to 123.27); and Hawaii (down 11.62
percent to 81.99).
e highest risk states include Mississippi
(152.67), South Carolina (139.27), and Louisiana
(139.07). e lowest risk states were North
Dakota (74.57), Minnesota (78.47), and Hawaii
(81.99).
Mortgage-
backed
securities
guaranteed in
January 2014.
Source: Ginnie Mae
STAT INSIGHT
$22.93B
