Demand for consumer credit showed an increase of 21.4 percent in the second quarter ended June 30 compared with the year-ago period, according to TransUnion's Total Inquiry Index.
“The increase in consumer-initiated inquiries indicates stronger consumer demand for credit, and may be a signal that consumers are beginning to increase their spending on discretionary items and larger-ticket purchases, reflecting stronger consumer sentiment and confidence toward the U.S. economy,” says Charlie Wise, director of research and consulting in TransUnion's financial services business unit.
TransUnion’s Credit Risk Index, a gauge of the risk inherent in the U.S. credit-using population, fell in the second quarter, reversing the increases seen in the prior two quarters. A higher index indicates a higher level of credit risk.
“It was good to see the credit risk level decline this quarter to roughly the same level it was last year,” says Wise. “Delinquency rates for major loan types have all declined in the first half of 2012, and that contributed to the drop in the risk index in the second quarter.”
The Credit Risk Index decreased 1.57 percent in the second quarter compared with the prior quarter, from 123.98 to 122.03. On a year-over-year basis, the Credit Risk Index had a a nominal 0.66 percent increase.
Delinquency rates for major consumer loan types, including bankcard, auto, and mortgage, all declined on a quarter-over-quarter basis in each of the first two quarters of 2012. Delinquency rates for each of these loan types remained flat or declined year-over-year from Q2 2011 to Q2 2012. These improvements in loan delinquency rates have offset moderate increases in consumer borrowing over the past year, including increases in auto loan balances and increases in the average bankcard balance per consumer.
“Consumers have stepped up their borrowing over the past year, particularly in bankcards and auto loans. New card and auto loan originations have both grown over the past year, and average balances per consumer for both these loan types increased between Q2 2011 and Q2 2012," Wise says. "Despite those increases, we are pleased to see that delinquency rates have remained flat or declined. Consumers are maintaining consistent payment behavior on their bankcards and auto loans, as well as on mortgages, which is the key reason why the U.S. Credit Risk Index has remained flat over the past year."
Q2 2012 CRI Statistics
· At 122.03, the TransUnion CRI is 7.6 points lower than its peak in Q4 2009 (129.67). Credit risk within the U.S. is now below the level measured in Q4 2008 (124.79), which at that time was beginning to accelerate toward historic levels.
· Year over year, 15 states experienced a decrease in credit risk. Of the five most populous states, three saw year-over-year CRI declines, including Illinois (- 3.28 percent, to 117.21), California (-1.39 percent, to 118.94) and Texas (-0.40 percent, to 151.95). The other two saw year-over-year CRI increases, with New York up 2.57 percent, to 107.87 and Florida up 0.93 percent, to 143.25.
· Quarter over quarter, all 50 states saw a decrease in credit risk; only the District of Columbia experienced an increase (+ 0.98 percent). Illinois had the largest quarter over quarter decrease, dropping 6.53 percent to 117.21. Last quarter, 31 states plus the District of Columbia experienced a quarter-over-quarter increase..
· Of the four states generally considered hardest hit by the recent recession, three experienced year-over-year declines in CRI, including California (-1.39 percent), Nevada (-1.15 percent) and Arizona (-0.86 percent). Only Florida (+ 0.93 percent) saw an increase.
· States with the lowest CRI continue to be concentrated in the Upper Midwest and New England regions. The states with the lowest CRI’s are North Dakota (76.90), Minnesota (86.29) and South Dakota (89.19).
The source of the underlying data used for the analysis is TransUnion’s Trend Data, a 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.