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Just when you’ve gotten it straightened out with FICO Scores, Vantage scores, and what they all mean, there’s another number out there used to gauge consumer credit: the Credit Risk Index. Fortunately, TransUnion’s Credit Risk Index doesn’t necessarily affect the credit you, as an individual borrower, can get, and there’s no way you can make a conscious effort to change the CRI. The CRI is a statistic developed by TransUnion to measure the changes in average consumer credit risk regionally. It is defined as the weighted average probability of 90-day delinquency or worse amongst consumers in a given region, relative to the entire U.S.
The CRI hit a record high of 129.29 percent in the third quarter of 2009, but has decreased steadily since then, reaching 126.79 in the third quarter of 2010. It hasn’t been this low since the first quarter of 2001, a positive sign for the economy as a whole and statistical proof that yes, the credit crunch of 2008 is truly over and the credit market is improving — at least for lenders.
The CRI won’t affect you directly in terms of your individual credit rates or the quality of credit card you can earn. But as lenders see that consumers are less of a credit risk, in general, it stands to reason that they will lighten lending restrictions. We’re beginning to see this with high-quality rewards cards available to consumers with good-to-excellent credit.
When — or if — this trend hits the housing market and mortgages become easier to obtain, we could see a real difference in the economy and consumer confidence, as well as increased borrowing, which will stimulate the economy in a cyclic effect.
Also, with fewer defaults, credit card lenders are in a better financial way to offer lower interest rates, better rewards, and more generous balance transfer offers. At least we can hope so.
The other side of that coin is that, with the regulations from the Credit CARD Act of 2009, credit card companies are looking to make up for lost profits. Many credit card experts predict higher balance transfer fees, higher interest rates, and higher annual fees, cleverly as “bi-annual” or even “quarterly” fees. Instead of paying $95/year for a choice rewards card, you might pay $50 or more every 6 months. The solution? Do the math, read statements and fine print carefully, and know exactly what you’re getting.
TransUnion has another way to measure the credit health of the country, too. The organization’s 90-day Total Inquiry Index measures credit inquiry levels generated by consumers, benchmarked to figures from 2000 and, like the CRI, evaluated regionally. The TTI has risen 6.5 percent since last quarter, which is in contrast to survey evidence saying that consumers are more cautious about credit than ever before. People may be applying for new cards since the credit crunch ended, but people with existing credit are using it much more conservatively, according to several other studies.
Wondering where your state stacks up? With the national CRI average at 129.27, Nevada remains the state with the highest CRI at 163.85, followed by Mississippi (162.41) and Texas (159.88). States with the lowest CRI are North Dakota (80.81) and Minnesota (89.54).
You can find out more at Trans Union’s Trend Data database.