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Credit Risk and Demand Decline in 2010 Fourth Quarter

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Consumers’ credit risk declined 0.9 percent between the third and fourth quarters of last year, while demand for new credit cards continued to slip as well, according to the latest statistics from the credit monitoring firm TransUnion. The country’s Credit Risk Index fell to 3.13 percent below the figure seen at the end of 2009, as 49 states and Washington, D.C. saw declines in their CRIs. Only Wisconsin experienced an increase, but that state is still considerably below the national average.

Meanwhile, consumers’ demand for credit accounts continued to slip as well, the report said. Between the fourth quarters of 2009 and 2010, inquiries have declined 5.7 percent.

“The gradual decline in the Credit Risk Index, coupled with a 5.4 percent decrease in the demand for credit over the previous year, as reflected in TransUnion’s Total Inquiry Index, suggests that consumers are relying more on existing credit or switching to cash or debit cards,” said Chet Wiermanski, global chief scientist at TransUnion. “While more consumers will have stronger credit profiles making them attractive to credit marketers, the underlying demand for credit appears to still be soft.”

Many consumers may be less interested in new credit accounts because they are wary of the effect new lines of credit may have on their finances, perhaps as a result of past experiences.

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