Just today TransUnion has release new numbers that address the underlying issue in my recent articles on debt relief demand trends.
TransUnion is reporting that their Credit Risk Index (CRI) has gone down for five straight quarters which indicates that consumers are more likely to repay their debt.
They are also reporting that consumer demand for credit is declining as well.
Consumer demand for credit, as measured by TransUnion’s Total Inquiry Index (TII), also decreased in the first quarter to 64.41. The higher the TII number, the greater demand is for credit by consumers. Using 2000 as the base year of the index, demand for credit remains historically low. However, the quarterly decline in the index (2.2 percent) was the slowest decline since the first quarter of 2008, possibly indicating a deceleration or leveling off of its trajectory.
This may be an early clue that we may be near the valley floor and if a couple quarters of increasing demand follow that would be a strong indicator that demand for debt relief services will increase once consumers get overloaded on credit again. My prediction has been that it will take 18-24 months from the time consumers start loading up on credit again before demand for debt relief services will reach much higher levels.
For debt relief providers the uncertain issue is when consumers do begin to increase their use of credit, will consumers have learned some lessons from this economic downturn that results in them not becoming so overloaded and needing outside help and intervention to deal with it.
I predict initially they will but those lessons will be lost the longer a recovery takes place.
“The broad and steady decline in the Credit Risk Index, coupled with a moderate decrease in the demand for credit over the previous year suggests that consumers continue to live within their means, tending to acquire new credit only for larger, specific purchases,” said Chet Wiermanski, global chief scientist at TransUnion. “The percentage of consumers delinquent on any credit account has returned to the level immediately preceding the Great Recession, which is the primary reason for the decline in the Credit Risk Index. During this period, consumers have fundamentally changed the composition of their personal credit portfolio.
“In less than four years, the percentage of consumers with at least one general purpose bank issued credit card has dropped from its peak of nearly 75 percent to just below 66 percent, a level not seen since early 1998, with all indicators pointing to lower levels in the quarters to come. Conversely, the use of installment loans from banks, credit unions and finance companies, which historically exhibit lower level of delinquency, has remained relatively stable for nearly 20 years. The shift toward more responsible use of credit, coupled with an anticipated improvement within the economic front, e.g. employment, personal savings rates and consumer sentiment, should drive the Credit Risk Index lower for the next several quarters,” added Wiermanski.
Bottom line, without a basic consumption of credit by consumers there will be less of a need for debt relief solutions.
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