For the first time since 2008, U.S. households stayed out of financial distress for three consecutive quarters, according to the Consumer Distress Index from CredAbility, a nonprofit credit counseling agency.
In Q4 2012, households scored 71.8 out of 100, an increase from 70.48 in Q3 and 67.60 in Q4 2011. A score below 70 indicates a state of financial distress.
“The average household appears to have turned the corner, managing credit wisely over the holidays and saving money over concerns that the federal government could have fallen over the ‘fiscal cliff,’” explained Mark Cole, EVP for CredAbility.
Despite the recent improvements, Cole warned of threats that still remain.
“However, these recent gains may be fragile. We need to stay vigilant as mortgage delinquencies remain stubbornly high
and increases in gasoline prices and Social Security taxes in January take more money from consumers’ paychecks,” he added.
The quarterly index measures distress by tracking five categories: employment, housing, credit, how families manage household budgets, and net worth. According to counseling agency’s index, all categories increased over the year and employment rose to the highest level in four years.
In addition to a national score, the index also ranks all 50 states and 77 of the largest metropolitan statistical areas (MSAs).
In Q4, 13 states were categorized as being in a state of distress after scoring less than 70. Hard-hit Nevada had the lowest score, 63.40. Mississippi ranked second with its score of 65.46 and was followed by Georgia (66.46), Alabama (67.10), and Michigan (68). The four states furthest away from a state of distress were located in the Great Plains: North Dakota (86.48), South Dakota (84.32), Wyoming (81.54), and Nebraska (79.86). Iowa was No. 5 after scoring 79.71. North Dakota, South Dakota, and Wyoming are also among the top five for their low mortgage delinquency rate, according to data from LPS.
Among the MSAs, CredAbility deemed Minneapolis-St. Paul as the most financially fit after the metro obtained a score of 80.12. Other high scoring metros included Washington D.C. (79.23), Boston (79.07), Houston (76.04), and Denver (75.22). Three out of the five metros in the most distress were located in Florida, with Orlando leading as the most distressed MSA, followed by Las Vegas, Tampa, Riverside, and Miami.
By: Esther Cho
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