CHICAGO, IL--(Marketwired - Mar 5, 2014) - TransUnion's Credit Risk Index, a measure of aggregate credit risk in the nation, dropped at the conclusion of 2013 to its lowest level since 2005.
"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, vice president of research and consulting for TransUnion's financial services business unit. "This 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."
Key Data Points
- The Credit Risk Index (CRI) dropped to 110.10 in Q4 2013, down nearly 9% from the 120.64 reading in Q4 2012.
- The CRI peaked in Q4 2009 at 129.67, 15% higher than the current level.
- States experiencing the greatest CRI improvements in the last year, include:
- California (-12.97% from 115.75 in Q4 2012 to 100.74 in Q4 2013)
- Nevada (-12.94% from 150.31 in Q4 2012 to 130.85 in Q4 2013)
- Florida (-12.17% from 140.35 in Q4 2012 to 123.27 in Q4 2013)
- Hawaii (-11.62% from 92.77 in Q4 2012 to 81.99 in Q4 2013)
- Highest risk states: Mississippi (152.67), South Carolina (139.27) and Louisiana (139.07)
- Lowest risk states: North Dakota (74.57), Minnesota (78.47) and Hawaii (81.99)
- While credit scores are highly effective at measuring individual consumer credit risk, averaging credit scores does not yield accurate measures of the average "riskiness" of a population because credit scores are not linear.
- To address this issue, TransUnion developed the Credit Risk Index as an accurate measure of population risk.
- The 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.
- 1998 is considered by TransUnion 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 Credit Risk Index had generally ranged between 110 and 120 between 2001 and 2007, experiencing a one- or two-point shift between quarters. Since the latest recession, the CRI mostly stood between 120 and 130.
- The CRI allows for accurate comparisons of risk between geographies, and within a given geography over time.
As a global leader in information and risk 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 high quality data, and integrating advanced analytics and enhanced decision-making capabilities. 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 reaches businesses and consumers in 33 countries around the world on five continents. www.transunion.com/business