TransUnion's Credit Risk Index - a measure of general risk inherent in U.S. consumer credit
- increased during the fourth quarter of last year for the first time in two years. The data point to continued uncertainty in the credit market, despite recent upticks in consumer confidence, employment and spending activity. On a quarterly basis, the CRI expanded by 2.3 percent during the October-December period to reach 123.36 points, stemming a string of declines that begin in the first quarter of 2010. Year-over-year, however, the CRi is down 1.7 percent. "Last quarter, TransUnion noted that the broad and steady decline in the CRI was beginning to level off," said Charlie Wise, director of research and consulting at TransUnion. "Increases in borrower delinquencies certainly played a role with this reported rise, with delinquency rates on credit cards and mortgages both slightly rising in the fourth quarter." On a regional basis, almost every state and the District of Columbia showed gains in consumer credit risk during the fourth quarter. Only Alaska, North Carolina and Utah enjoyed a dip in risk from the previous quarter. Massachusetts, Kentucky and West Virginia showed the largest gains in year-over-year credit risk. However, analysts noted, credit utilization is subject to seasonal trends and often climbs at the end of the year due to holiday shopping trends. This places upward pressure on credit risk itself. The fourth-quarter increase may also be attributed to a rise in the percentage of non-prime consumers with an active bank card. "As lenders make credit more widely available at the riskier end of the credit spectrum, it is inevitable that the risk of default will increase for the population on average," Wise added. While some banks and private lenders have been loosening their credit standards to meet rising demand, many remain hesitant to do so, especially considering the tepid pace of economic recovery, uncertainty stemming from the European debt crisis and a looming presidential election. Financiers that are active in distributing loans need to adopt consumer credit risk management practices to protect their assets and limit the threat of default.