Community Dividend

Report reveals increase in consumer financial insecurity

Published July 1, 2006  |  July 2006 issue

A new report from the Brookings Institution’s Metropolitan Policy Program reveals that financial insecurity among American consumers, as measured by the frequency of loan delinquencies, increased in recent years. The report, titled Credit Scores, Reports and Getting Ahead in America, is based on a survey of credit records from TransUnion, one of the nation’s three major credit-reporting bureaus, and demographic data from the U.S. Census Bureau. Brookings researchers analyzed quarterly samples of 25 million anonymous consumer credit reports and scores from 1999 to 2004. The samples represent every county in the U.S.

The analysis shows a rise in loan-delinquency rates during the survey period. The overall rate of home mortgage delinquencies increased 115 percent, from 1 in 100 consumers in 1999 to about 1 in 50 in 2005. During the same period, the ratio of borrowers who are over 60 days behind on a loan payment rose from 1 in 23 to 1 in 21.

Southern states showed the highest average rates of financial insecurity and the lowest average credit scores. In 2004, 6 of 100 borrowers in the South had a delinquent loan, compared to 5 of 100 borrowers throughout the rest of the U.S. The average credit score for the entire U.S. in 2004 was 656, out of a range of 350 to over 850; the average credit score in the South was 635. In a typical Southern county in 2004, 22 percent of borrowers had very weak credit scores of 492 or below, compared to 16 percent of borrowers in a typical county in other regions.

The report also reveals that from 1999 to 2004, most counties with weak average credit scores saw their scores decline sharply, while counties with strong average credit scores saw their scores increase; and counties with relatively high proportions of racial and ethnic minorities were more likely to have low average credit scores than counties with high proportions of white residents.

To access the report, visit www.brookings.edu/metro/publications_papers/
20060501_creditscores.htm
.

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