Home Depot Inc. reports credit scores are weakening among holders of its private-label credit card and, not surprisingly, customers more often are paying late and defaulting. While the portfolio's average FICO score–the credit score developed by Fair Isaac Co.–is "actually very good" at 726, the average active FICO score is 672, down from 679 a year ago, Carol Tome, Home Depot chief financial officer, said during an analyst conference call Thursday. The active score is widely considered by risk managers to be a better gauge of existing credit quality. Rising delinquencies and higher loss rates in the private-label portfolio, which Citigroup owns through an agreement with Home Depot, are leading to higher costs for the retailer. Home Depot expects costs tied to the credit card to fall below 4% of card sales in 2008, up from an estimated 2% cited in February. The retailer also said per-share profit could drop up to 24% this year, but projected earnings per share would grow in double-digit percentages annually when the U.S. housing market rebounds. Sales at stores open at least one year, an important retail measure, will log their worse showing in the second quarter and already were down 6.5% in the first quarter. The second quarter often is one of the strongest for the home-improvement retailer as consumers spruce up homes in warmer weather. But lower housing sales, falling home values and tighter credit have curbed demand for the big-ticket renovations that powered Home Depot's growth during the housing boom.

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