TransUnion’s Credit Risk Index, a measure of the risk inherent in the U.S. credit-using population, decreased in Q2 2012, reversing the increases seen in the prior two quarters. Quarter over quarter, the Q2 2012 CRI for the U.S. decreased 1.57 percent from 123.98 to 122.03. On a year-over-year basis, the CRI had a nominal 0.66 percent increase. A higher index indicates a higher level of credit risk.
"After upticks in the prior two quarters, it was good to see the credit risk level decline this quarter to roughly the same level it was last year," said Charlie Wise, director of research and consulting in TransUnion’s financial services business unit. "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."
On a related note, demand for consumer credit showed an increase of 21.4 percent in Q2 2012 from the same period a year ago, as measured by TransUnion’s Total Inquiry Index. This increase brought the TII to the highest quarterly level since Q3 2007, which was before the start of the past recession.
"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," Wise said.
As TransUnion has been reporting, 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. Further, 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,” Wise said. “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. 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.”