Creditnet News Story

Credit Risk Index increases slightly in fourth quarter

Friday, March 19, 2010

By Danielle Robson

Lenders may be more willing to grant credit if conditions continue to improve.

A recent report from TransUnion showed that Americans continued to try and manage their debts in the fourth quarter of last year.

The firm's Credit Risk Index increased 38 basis points between the third and fourth quarters of 2009. That marks the smallest increase seen in the index since the early part of the most recent recession.

The index reached 129.67 during the fourth quarter, up from the 129.29 seen the previous quarter. TransUnion said that a number above 100 on the index's scale means lending is riskier.

Chet Wiermanski, global chief scientist at the company, said that the economy's financial recovery may be starting to take effect based on the "plateau" seen in the index during the fourth quarter.

"The prospect of a decrease in the Credit Risk Index for the first time in more than two years possibly as early as the end of 2010 continues to improve as the economic recovery expands to a greater number of states in the coming months," Wiermanski said.

If the riskiness of lending is reduced in the coming months, it is possible that banks may be more willing to send out credit card offers while also loosening credit score requirements for accounts. Many lenders increased credit score thresholds in order to mitigate their vulnerability to delinquencies and defaults.