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Consumer Credit Risk Declines for Seventh Straight Quarter, TransUnion Reports

November 29, 2011

CHICAGO — TransUnion’s Credit Risk Index declined for the seventh consecutive quarter, as consumers continued to pay off debt and maintained relatively lower delinquency levels. The CRI for the U.S. market decreased 4.9 percent from a year ago to 120.62.

"The lengthy, broad and steady decline in the Credit Risk Index, which reflects declines in consumer delinquency and debt levels, is beginning to show signs of a potential slow down," said Chet Wiermanski, global chief scientist at TransUnion. "Recent small increases in consumer delinquency across all major categories coupled with slight increases in the use of existing credit cards and demand for new credit may contribute to a deceleration in the decline of the CRI over the next several quarters."

For the past several quarters, there has been increased lending activity among banks and finance companies across several revolving and installment loan categories, according to TransUnion's trend data. "Increases in the percentage of consumers with new accounts with generally higher credit limits, coupled with lower utilization rates for revolving account types reflect a healthier balance of risk," Wiermanski said.

The 61 basis point quarterly decrease (120.62 from 121.22) at the national level was the smallest decline since the CRI peaked in the four quarter of 2009. The decline places the CRI at a level not witnessed in the United States since the third quarter of 2008. The Index has declined by 905 basis points or 6.98 percent since reaching its peak of 129.67 during the fourth quarter of 2009.

As for consumer demand for credit, TransUnion's Total Inquiry Index showed an slight increase of 0.7 percent in the third quarter from the previous year. Although the change in the TII indicated that demand for total credit remains low, an annual increase of 10 percent for auto credit during the third quarter of 2011 is encouraging.

"Lenders are making new credit available to an increasing percentage of consumers, who, in turn, are conservative with their use of it," Wiermanski said. “Continued responsible use and repayment of credit by consumers during the rest of 2011 should modestly improve the CRI to levels witnessed just prior to the early stages of the credit and mortgage crisis."

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