Experian Announces Launch of Experian-Gallup Personal Credit Index

NEW YORK – Experian® and The Gallup Organization today announced the launch of the Experian-Gallup Personal Credit Index(SM). This joint project measures consumers’ perceptions of their credit status including four key areas related to credit: level of debt, monthly payment burden, credit rating, and debt extension capability. A Web site dedicated to the Experian-Gallup Personal Credit Index can be found at www.PersonalCreditIndex.com.

“The four areas of credit being measured in our monthly Personal Credit Index all contribute to a consumer’s overall financial health,” said Ed Ojdana, president of Experian Consumer Direct. “This in turn will help consumers examine where they personally fit within the Index and use it as a gauge for how they may want to behave in the future regarding their credit use.”

The “baseline” Personal Credit Index score is 100 and suggests that people are considerably more optimistic about their future credit situation than they are about their current credit situation. This point is particularly evident in consumers’ evaluation of their debt. Looking at the past six months, 33 percent of consumers say they have reduced the amount they owe, while an almost equal number, 28 percent, say they have added to it. When looking to the next six months, however, 52 percent of consumers expect to reduce their debt, compared with just 15 percent who expect to increase it.

The Personal Credit Index shows that in general, men tend to be more positive than women about their credit situation, older consumers more positive than younger consumers, and higher income consumers more positive than lower income consumers. The income differences are dramatic with a Personal Credit Index of 44 among consumers with annual incomes under $40,000 a year, a Personal Credit Index of 107 for consumers with incomes from $40,000 to less than $75,000 a year, and a Personal Credit Index of 171 for consumers with annual incomes of $75,000 or more.

“The Personal Credit Index indicates that consumers are significantly more optimistic about their future credit situation than their current situation, especially in the area of reducing future debt,” said Dennis Jacobe, chief economist for The Gallup Organization. “It’s also to be expected that consumers at the higher income levels tend to be more optimistic about their credit situation than lower-income consumers.”

In addition to measuring the Personal Credit Index each month, the Experian-Gallup survey will ask consumers questions about key issues affecting their credit. The current baseline survey finds that one in five consumers is feeling the pinch of rising interest rates, which have forced this group to cut back on its spending. Consumers with variable interest rate loans are especially vulnerable.

Three in four consumers have a credit card and most of these consumers, 69 percent, report having a fixed interest rate. Similarly, about half of the consumers have a home mortgage and 87 percent of these consumers say the mortgage rate is fixed rather than variable.

Consumers with a home equity loan or line of credit, however, are much more likely to have variable interest rates. Thirty percent of the consumers with an equity loan, and 45 percent with an equity line of credit, report variable rates. Among these consumers, more than a third say their interest rates have increased over the past six months.

“Due to expected increases in interest rates, consumers with variable rates should be concerned,” said Jacobe, “especially if they are not able to handle an increase in their monthly payments.”

Overall, about a quarter of all consumers have some type of variable credit, either on a credit card, a home mortgage, equity loan, or equity line of credit. Among these consumers, 25 percent report feeling the pinch of interest rates compared with 18 percent of consumers who do not have such loans.

These findings are part of the benchmark Experian-Gallup Personal Credit Index, which was conducted between January 17 and February 7, 2005. The sampling included 2,007 adults, 18 and over, randomly selected from across the country. The sampling error is plus or minus three percentage points.

More information about the Experian-Gallup Personal Credit Index can be found on the official Web site at www.PersonalCreditIndex.com.