Lenders today continue to battle the headwinds of high unemployment, a stalled economic recovery, and a backlog of bad mortgage loans from the heyday of the housing boom – all contributing to a marketplace stressed with high levels of delinquencies and complex resolutions.
While it will take some time to get out from under all these negatives, the underpinnings of a new age of creditworthy, financially savvy borrowers are beginning to take shape. The nonprofit credit counseling agency CredAbility says American consumers have been shoring up their household finances.
In the second quarter of 2011, the financial picture for U.S. households continued to improve as delinquency rates on mortgages, as well as past-due payments for rental housing and credit cards continued to drop, according to CredAbility.
The Atlanta-based credit counseling agency tracks the financial condition of the average U.S. household with the CredAbility Consumer Distress Index each quarter. For the April-to-June period, the national index registered a reading of 69.20 on a 100-point scale, up from 68.15 in the first quarter of 2011.
A score below 70 indicates a state of financial distress. CredAbility says while the nation remains in financial distress – coming in under the 70-point threshold for the 11th consecutive quarter – the average household continues to make progress and is close to moving out of financial distress.
The score has risen for three consecutive quarters. Since the index’s low point in the third quarter of 2009, the agency’s distress reading has increase by approximately five points.
CredAbility’s PR director Scott Scredon says the explanation behind the higher score during the second quarter rests on the fact that fewer mortgages and rental obligations are going unpaid and consumers generally are becoming better managers of their own credit.
“Many people have made the tough choices needed to live within their means. They are paying their bills on time and getting their expenses in line with their income,” added Mark Cole, EVP of CredAbility and author of the index.
“Unemployment and underemployment continue to cause hardships for millions of families and weigh heavily on the confidence of the nation,” Cole continued. “But a positive emerging trend is that families are handling their personal finances more wisely.”
CredAbility’s index also measures the financial distress level of all 50 states and the District of Columbia. Among individual states, Nevada had the lowest score at 61.6, followed by Michigan, Mississippi, Alabama and Georgia.
Twenty-eight states and the District of Columbia had scores higher than 70, with six states moving above the financial distress threshold during the second quarter – Maine, Washington, New Jersey, Delaware, Utah, and New Mexico.
To see where your state ranks on the distress level, check out CredAbility’s national map and its timeline of distress readings, going back to 1998, on the agency’s website.