The credit information organization TransUnion recently issued a report that could be a good sign for car buyers with bad credit. The Credit Risk Index used by the company reflects that consumers continue to manage debt more effectively for the fifth consecutive quarter.
Though the index decline is good, it was the slowest since first quarter 2008, which means rough seas could still lie ahead.
This Credit Risk Index reflects the weighted average probability of at least a 90-day delinquency among consumers within a certain region in relation to the entire nation. The fourth quarter of 1998 is used as a baseline comparison.
Every quarter, TransUnion randomly samples 27 million consumer records from its credit database to use in its measurements.
Through the calculation of changes quarter-over-quarter, TransUnion determines a plus or minus change regarding credit risk from the fourth quarter 1998 100 basis points. Additional credit risk is represented by additional points, while a lower risk is reflected by a score under 100. During its most recent delinquency review, TransUnion did not find baseline deviations.
For the first quarter of 2008, the index was 118.83 and it grew to 127.26 in the first quarter of 2009. The report of the index for first quarter 2011 reflected a figure of 123.56, a five percent decrease from its high of 129.67 during fourth quarter 2009.
The most recent number was 1.6 percent lower than that reported for fourth quarter 2010. It seems that consumers are better managing their debts, perhaps indicating less reliance on cash advances and payday loans.
This continuation of positive movement affects many industries. For bad credit auto financing, it could mean that lenders will continue loosening their restrictions, though down payments will still be required and interest rates should not fluctuate.
Consumers should monitor their FICO score, select a reasonably-priced vehicle, and make as large a down payment as possible.
