Experian Announces Sharp Drop in Experian-Gallup Personal Credit Index

COSTA MESA, CA – Experian® and The Gallup Organization today announced that consumers have become less positive about their credit situation since last month, according to the latest findings of the Experian-Gallup Personal Credit Index(SM). Currently the Personal Credit Index is at 82, down from last month’s benchmark score of 100. More results for the Experian-Gallup Personal Credit Index can be found at www.PersonalCreditIndex.com.

“The drop in the Personal Credit Index suggests that rising interest rates are creating some concerns among consumers about their ability to continue borrowing money at good terms in the future,” said Ed Ojdana, group president of Experian Interactive. “Consumers may have good reason to feel this way since we have also seen a downward trend in consumer credit scores during recent months.”

The decline in the Personal Credit Index is due mostly to lower optimism about consumers’ future credit situation. The Personal Credit Index 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. The survey shows that the largest decline comes from consumers’ less positive feelings that six months from now they will be able to make their monthly payments and borrow money should they have the need.

The survey also shows that the largest decline occurred among the youngest consumers (under age 30), whose Personal Credit Index score fell by 45 points to 41. The 30-49 age group experienced a 21-point drop, with their Personal Credit Index now at 73. Among the pre-retirement age group, 50-64, there was only a modest 9-point drop, to 102, while consumers 65 and older showed a slight increase of 2 points, to 114.

“The credit of younger consumers is most susceptible to being battered by the economy because they usually don’t have a track record for managing credit,” said Dennis Jacobe, chief economist for The Gallup Organization. “These young consumers also may have financial obligations with variable interest rates which allow them to afford the payments. However, any rise in interest rates will increase their payments making it more difficult for them to meet their obligations.”

In addition to measuring the Personal Credit Index this month the Experian-Gallup survey asked Americans about their income tax returns. Overall, 85 percent say they expect to file their returns by the April 15 deadline, while just 7 percent expect to take an automatic extension. The rest have made other arrangements for paying their income taxes.

Most consumers, 63 percent, expect to receive a refund from the federal government, while 21 percent expect they will have to pay additional taxes. This pattern is similar to what consumers said they did last year, when 66 percent actually received a refund, and 19 percent paid additional taxes.

The survey also found that the younger consumers are, the more likely they are to expect a refund. Among those under 30 years of age, 81 percent expect a refund, compared with 73 percent in the 30-49 age group, 58 percent in the 50-64 group, and just 33 percent among those 65 and older. Overall, the average expected refund is slightly more than $2,000.

Almost half of consumers receiving a refund expect to use it to pay bills, while another 9 percent say they will use it to make a special, large purchase such as a car or furniture, and 6 percent say they will use the money for a vacation. Only 31 percent say they will save or invest the money.

About a third of consumers who expect to owe money do not know how much they will owe, but among the rest, the average amount is expected to be approximately $2,200. One in ten say they will owe $5,000 or more.

Twenty-seven percent of these taxpayers, representing 6 percent of all Americans, say they will either borrow money or pay off their debt to the IRS using the IRS’s own installment payment program. Perhaps even more would use the installment plan, but 40 percent of consumers who owe money say they are not aware of that option.

“Consumers should also be aware that when taxes are unpaid, the Internal Revenue Service can place a lien on their assets. If tax liens are unpaid, they will remain on a credit report for up to 15 years, while paid tax liens remain on a credit report for seven years,” said Ojdana. “According to the Experian National Score Index(SM), the national average credit score for consumers is currently 676. However, those who have a tax lien on their credit reports have an average credit score of 609, compared to consumers who do not have a tax lien with an average credit score of 678.”

More information about the Experian-Gallup Personal Credit Index can be found on the official Web site at www.PersonalCreditIndex.com. In addition, for information about average credit scores and other credit related data at the national, regional, state and local area levels, visit the Experian National Score Index site at www.NationalScoreIndex.com.