CredAbility, one of the largest nonprofit credit counseling and education agencies in the U.S., issues a quarterly index called CredAbility Consumer Distress Index.  This index tracks five categories to determine the financial condition of the average U.S. household – employment, housing, credit, how families manage household budgets, and net worth. Proprietary data collected from more than 630,000 individuals that CredAbility serves annually is also used to determine this Index. The index looks at each category nationally and by state.  The latest index is from third quarter 2011.

The Consumer Distress Index for U.S. households in third quarter 2011 was 66.7, which was a decrease for 69.2 in second quarter 2011. This was the largest drop since third quarter 2008 and the first time the index didn’t increase in the past six quarters. U.S consumers have been in financial distress for 12 consecutive quarters. The Consumer Distress Index is based on a scale of 1 to 100, with a score below 70 indicates financial distress.  Overall the housing and budget categories were below 70, indicating financial distress.  The credit category is not in financial distress and the Consumer Distress Index increased to 84.95, which is the highest in 15 years. read more »

In late 2011 FICO, the company behind the ubiquitous FICO credit score, conducted research on score trends from October 2006 to April 2011 using a random sample of 10 million U.S. consumers with credit reports.  I have discussed this research in previous blogs and FICO has conducted more research to provide answers to the following questions:

How much has consumer credit behavior changed over these years of economic stress?

Do shifting levels of delinquencies reflect changing behavior?

How much impact is mortgage pressure having on bad credit behavior? read more »

Auriemma Consulting Group conducted an online survey of 509 U.S. adult credit card users in September 2011 regarding payment priorities. Payment priorities shifted from credit cards to mortgages; credit cards were the number one priority in 2009 and 2010, but moved to number three in 2011.

Highlights

When the responders were asked their top financial obligations,  83 percent said credit cards,  59 percent  said utility payments, and 51 percent said mortgages or rent.  Payment priorities did not match their financial obligations. When asked about their highest priorities, 77 percent of respondents selected mortgage payments as the first, 52 percent selected utility payments next and 38 percent selected credit cards as third. Compared to 2009, credit cards were the first priority, mortgages were the second and auto loans were the third. The percentages were not given by Auriemma for the 2009 survey. read more »

You may have noticed businesses that offer title loans, or at least you’ve seen or heard advertising for them. Some of these businesses not only offer title loans, but also check cashing and pawn loans.  These are what I called “2nd tier” loan options, and they are becoming more popular than ever.  Here’s the low down on these options…

Title loans

What are title loans? Car title loans use your car as collateral for a loan, but you must own your car free and clear.  You hand over the car title and extra set of keys, and if you don’t pay, they can take your car.  Since there is no credit check, only income verification, those with poor credit are more prone to get these loans.

High interest rates

Title loans are marketed as emergency loans, similar to payday loans. They are usually for 30 days with amounts usually ranging from $300 to $2,500. The interest rates can be 30 percent a month, which is 360 percent annually. The lender usually lets you borrow up to 50 percent of the car value, which is substantially lower than its value.  The borrower signs loan papers, with the terms which include the car as collateral. read more »

Recently a study was conducted by researchers from three universities – Louisiana State University, Texas Tech University and North Illinois University – to determine if there is any correlation between credit scores and personality and job behavior. Their finding were that there was a correlation between credit scores and personality, but not with credit scores and job behavior.

Credit scores and personality

According to the research being agreeable or friendly is related to those with a low credit score. In other words, nice people have lower scores. The explanation is that someone who is nice is more likely to co-sign for a credit card or loan for a friend or family member. They don’t turn down the sales clerk who asks them to apply for a credit card. read more »

I get on my soap box this time of year to remind you to get free copies of your credit reports from all three credit reporting agencies – Equifax, Experian and TransUnion. You are entitled to receive a free credit report from each company every twelve months, according to the Fair Credit Reporting Act (FCRA).  Have you ordered any this year? If not, go to www.annualcreditreport.com to get your free report.   Did I say free?  Unfortunately free scores are not included.

Free from certain states

In addition, seven states have laws that give you one free credit report annually from all three companies.  The states are Colorado, Georgia, Maine, Maryland, Massachusetts, New Jersey,  and Vermont. If you are a resident of one of these states, you get one for the federal law and one for the state law, which is two a year per company, or six free a year.  Georgia is two per year. read more »

Consumer Reports National Research Center conducted a nationwide survey from July 1 to 10, 2011 of 1,258 adults 18 years and above regarding credit cards. Over one third of responders had at least one problem with their credit card company in a year and saw slight improvements in how they were treated by credit companies this year compared to last.

Credit cards are one of the lowest-rated services that Consumer Reports has analyzed with only 51 percent of responders highly satisfied with their credit cards in 2011 compared to 45 percent in 2010.  Thirty five percent of responders had at least one credit card problem in the last year, such as new annual fees, higher interest rates, lower credit limits, or limits on rewards.  The number of responders that experienced unwelcome news about lower credit limits decreased from 37 percent in 2011 from 47 percent in 2010.   Taking this into account, it is surprising that only 12 percent of responders said their credit card companies had treated them unfairly in 2011.  The proportion decreased from15 percent in 2010 and from 22 percent in 2009. read more »

In October, I discussed FICO’s report on the national distribution of FICO® 8 Scores comparing before, during and after the recession from 2005 to 2011.  FICO is the creator of the ubiquitous FICO credit scoring system, the most commonly used credit score. Pre-recession score distributions had movement to the lower and higher scores, while during the recession more scored in 550 to 649 range.  A majority paid their bills well so that the overall distribution didn’t change drastically, but the individual scores did change more.  FICO issued additional information on how individual scores changed in two points in time –  during the recession (2008 to 2009) and post recession (2010 to 2011). read more »

A reloadable prepaid card has cash preloaded on it. It is not a debit card, gift card or credit card.

How do they differ? A debit card is connected to your checking account. A gift card is for a particular amount and usually for a particular merchant; it is not reloadable. A credit card allows you to buy now and pay later for the purchase and it is included on your credit report. A reloadable card is money loaded on a card, it is considered cash, and can be used anywhere.  The card does not have to be thrown away and can be reloaded again. Many reloadable prepaid cards are affiliated with MasterCard, Visa or American Express. They are meant for long term use and for those who don’t have bank accounts or credit cards, especially high school and college students. read more »

Experian, one of the three major credit reporting agencies, conducted their second- annual State of Credit list of cities with the highest and lowest credit scores.  The data from this report was based upon data from January through June 2011 and used the VantageScore.  The VantageScore was developed jointly by the three major credit reporting agencies – Equifax, Experian and TransUnion. The scores range from 501 to 990, a score in the 700 range is considered average or a “C”; a score is the 600’s is considered a “D”.   The average VantageScore before the recession was 754, was 748 in 2010 and was 749 in 2011.  There was a one-point gain in 2011. read more »