CredAbility Consumer Distress Index: Economic Recovery Failing to Ease Financial Stress on Average US HouseholdsWednesday, February 16, 2011

Health of Average Household Budget Declines For Six Consecutive Quarters

ATLANTA, GA, February 16, 2011 – CredAbility, one of the leading nonprofit credit counseling and education agencies in the United States, today released the CredAbility Consumer Distress Index results for the 2010 fourth quarter. The Index, a quarterly measure that tracks the financial condition of the average US household, found that rising stock prices helped propel growth in consumers’ net worth. But lower scores in three of the index’s other four categories -- employment, housing and household budget – drove down the overall index. The health of household budgets declined each quarter in 2010 and is at the lowest level since the first quarter of 2009.

For the quarter ended December 31, 2010, American households scored a 64.3 on the Index’s 100-point scale, down slightly from 64.4 in the third quarter of 2010. For all of 2010, the index showed a small improvement, moving up from a score of 63.9 in 2009’s fourth quarter.

A score below 70 indicates a state of financial distress. The average US consumer has been in financial distress for 10 consecutive quarters, according to the Index. The last time the index was above 70 was in the second quarter of 2008.

According to the index, the 10 states ranked as the most financially distressed account for nearly 33 percent of the nation’s Gross Domestic Product. These states include California and Nevada in the West; Michigan and Indiana in the Midwest and Florida, Georgia, Alabama, North Carolina, South Carolina and Mississippi in the Southeast.

While US Gross Domestic Product (GDP) increased 3.2 percent in 2010’s fourth quarter, the CredAbility Consumer Distress Index indicates that the increased economic activity has not yet helped many Americans.

“The increase in the GDP in the fourth quarter and 2010 has not yet translated into improved financial health for many average American families,” said Mark Cole, CredAbility’s chief operating officer and the executive responsible for the CredAbility Consumer Distress Index.

“Improved stock prices have increased the value of 401(k) and other investment accounts in the average US household, but high unemployment continues to stifle income growth, causing many homeowners to miss mortgage payments,” Cole said. “While an increase in consumer spending helped the economy in the fourth quarter, the index showed that an increasing number of people failed to prudently manage their household budgets. This lack of savings could cause financial problems if they need to rely on their savings in the future.”

Based on the index’s data, Cole said that a tale of two different American families is developing in America. “The family with one or two stable jobs is seeing their investments grow again and is beginning to spend more of their household income,” he said. “But families that have lost a job or seen other income sources reduced, and who don’t have enough income to invest, have experienced increased financial distress.

“Unfortunately, millions of families are in the second category. In 2010, approximately 14.8 million people ended the year unemployed, more than 1 million families lost homes to foreclosure and 43.6 million Americans used food stamps to buy groceries.”

For the second straight quarter, Michigan posted the worst score on the Index with a 58.83. To see a detailed explanation of how the Index works and a national map, go to www.CredAbility.org/ConsumerDistressIndex. A link to the Index will also be posted on the CredAbility Twitter account, which can be found at http://twitter.com/CredAbility.

Other highlights from the fourth quarter index include:

  • Seven states, led by North Dakota (79.35) and South Dakota (76.94), scored above the distress threshold of 70 points. Others were Nebraska (74.84), Wyoming (74.09), New Hampshire (72.3), Vermont (71.3) and Iowa (70.05).
  • Seven more states and the District of Columbia are within two points of moving out of financial distress. These states are Massachusetts, Minnesota, Montana, Virginia, Utah, Connecticut and Colorado.
  • Among the most distressed states, Nevada moved from No. 6 to No. 3 and Florida moved from No. 7 to No. 5. For the first time in 2010, North Carolina moved into the top 10 most distressed states at No. 9.
  • Some states’ level of distress improved during the past quarter. Indiana, which had ranked as the No. 5 most distressed, is now No. 7. Ohio, which had ranked No. 8, is now No. 11.

Fourth quarter Index data by state:

Q4 2010

Q3 2010

Q2 2010

Q1 2010

Q4 2009

National

64.32%

64.40%

65.23%

65.04%

63.96%

States

Michigan

58.83%

58.11%

61.01%

60.69%

60.47%

Mississippi

59.24%

58.76%

60.62%

60.57%

60.69%

Nevada

59.27%

60.71%

59.23%

59.16%

59.56%

Alabama

60.03%

60.23%

61.89%

61.60%

61.46%

Florida

60.21%

60.81%

61.01%

60.70%

60.48%

South Carolina

60.56%

60.10%

61.29%

60.63%

60.09%

Indiana

61.16%

60.68%

62.61%

62.27%

61.74%

Georgia

61.26%

61.24%

61.37%

61.24%

61.13%

North Carolina

61.38%

61.66%

62.28%

62.11%

61.53%

California

61.39%

61.31%

61.71%

61.36%

61.29%

Ohio

61.41%

60.83%

63.06%

62.60%

62.18%

Tennessee

61.53%

61.54%

62.26%

61.72%

60.97%

Kentucky

61.63%

61.72%

63.38%

62.83%

62.03%

Rhode Island

62.29%

62.57%

63.70%

63.33%

63.20%

Missouri

62.78%

62.43%

64.62%

64.37%

63.97%

West Virginia

63.76%

63.22%

64.50%

64.11%

63.39%

Arkansas

63.79%

63.94%

65.73%

65.24%

64.54%

Illinois

63.79%

63.01%

64.66%

64.45%

64.43%

Arizona

63.81%

63.98%

62.05%

61.75%

61.62%

Louisiana

64.00%

65.07%

67.64%

68.13%

68.59%

New Mexico

64.74%

65.35%

65.72%

65.64%

65.42%

Maine

64.80%

64.29%

66.04%

65.78%

65.46%

Washington

64.99%

64.88%

65.60%

65.59%

65.71%

Pennsylvania

65.07%

65.23%

66.99%

66.92%

66.61%

Delaware

65.23%

65.53%

66.96%

66.34%

66.00%

Hawaii

65.40%

65.51%

68.65%

67.96%

67.84%

Oregon

66.04%

65.88%

64.66%

64.29%

63.72%

Texas

66.07%

66.48%

65.89%

65.82%

65.36%

New York

66.25%

66.61%

67.79%

67.45%

67.35%

New Jersey

66.47%

66.44%

67.67%

67.42%

67.40%

Idaho

66.54%

67.28%

65.11%

64.51%

64.48%

Wisconsin

66.91%

66.27%

68.05%

67.48%

66.59%

Maryland

67.33%

67.58%

68.94%

68.94%

68.89%

Kansas

67.77%

68.41%

70.26%

69.79%

69.29%

Alaska

67.82%

67.31%

70.70%

70.68%

70.70%

Oklahoma

67.98%

66.88%

68.63%

69.02%

69.10%

Colorado

68.16%

68.23%

68.34%

68.31%

68.15%

Connecticut

68.29%

68.20%

69.23%

69.04%

68.96%

Utah

68.38%

68.58%

67.65%

67.79%

68.15%

Virginia

68.41%

68.50%

69.30%

69.16%

69.21%

Montana

69.20%

69.28%

69.51%

69.99%

69.75%

District of Columbia

69.31%

68.55%

64.64%

66.07%

65.72%

Minnesota

69.38%

69.30%

69.75%

69.01%

68.14%

Massachusetts

69.58%

68.96%

68.37%

68.18%

68.08%

Iowa

70.05%

69.91%

71.40%

70.97%

69.98%

Vermont

71.32%

70.88%

72.05%

71.63%

71.07%

New Hampshire

73.30%

72.77%

70.64%

69.26%

69.07%

Wyoming

74.09%

72.54%

72.80%

72.83%

72.76%

Nebraska

74.84%

74.87%

76.09%

75.47%

74.20%

South Dakota

76.94%

76.19%

77.43%

77.21%

75.62%

North Dakota

79.35%

79.45%

78.95%

78.89%

79.25%