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Contact:
Heather Greer
Experian
714 830 7756 Telephone
heather.greer@experian.com Email
Experian announces sharp drop in Experian-Gallup Personal Credit Index. Consumers are feeling less positive about the future, while most expect to get an income tax refund
Costa Mesa, Calif., April 5, 2005 – 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 IndexSM. 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 IndexSM, 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.
About the Experian-Gallup Personal Credit Index
The Experian-Gallup Personal Credit Index is based on a monthly nationwide survey of households and measures four key areas related to credit: level of debt, monthly payment burden, credit rating, and debt extension capability. The sampling was conducted March 14-20, 2005, and included 1,010 adults, 18 and over, randomly selected from across the country. The sampling error is plus or minus three percentage points.
About the Experian National Score Index
The Experian National Score Index is based upon a nationwide sampling of three million consumer credit profiles. The Experian National Score Index is updated monthly with the most recent Experian data regarding U.S. consumers' credit and is a powerful indicator of the nation’s overall financial health. The Experian National Score Index monitors several components of consumer credit behavior including average debt, credit utilization, and monthly payments. The National Score Index is formulated using Experian’s credit score model, called the PLUS ScoreSM. The PLUS Score can range from 330 to 830 with a higher score indicating a lower credit risk.
About The Gallup Organization
The Gallup Organization has studied human nature and behavior for more than 70 years. Gallup employs many of the world's leading scientists in management, economics, psychology, and sociology. Gallup performance management systems help organizations increase customer engagement and maximize employee productivity through measurement tools, coursework, and strategic advisory services. Gallup's 2,000 professionals deliver services at client organizations, through the Web, at Gallup University's campuses, and in 40 offices around the world.
About Experian
Experian is a global leader in providing information solutions to organizations and consumers. It helps organizations find, develop and manage profitable customer relationships by providing information, decision-making solutions and processing services. It empowers consumers to understand, manage and protect their personal information and assets. Experian works with more than 50,000 clients across diverse industries, including financial services, telecommunications, health care, insurance, retail and catalog, automotive, manufacturing, leisure, utilities, e-commerce, property and government. Experian is a subsidiary of GUS plc and has headquarters in Nottingham, UK, and Costa Mesa, Calif. Its 12,000 people in 27 countries support clients in more than 60 countries. Annual sales exceed $2.5 billion.
For more information, visit the company’s Web site at www.experian.com.
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