Rising interest rates are the likely reason that consumers have become more worried about their credit, according to findings released last week by commercial data agency Experian and the Gallup Organization, an opinion research firm.
The Experian-Gallup Personal Credit Index stood at 82 last week, down from a benchmark score of 100 established with an initial poll a month earlier.
The drop in the 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 Personal Credit Index measures consumers’ perceptions of their credit status in four key areas: Level of debt, monthly payment totals, credit ratings, and the ability to take on additional debt if necessary. Researchers conducted the survey from March 14-20, gathering responses from 1,010 adults aged 18 and over who were selected randomly from across the country.
The survey indicated that consumers under the age of 30 had the least confidence among several age groups, with a Personal Credit Index score of 41, down from 86 a month earlier, a drop-off of approximately 52 percent.
“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.”
Respondents between the ages of 30 and 49 registered a Personal Credit Index score of 73, a decline of 21 points. That’s a 22 percent drop from a month earlier—significant but only about half the plummet recorded for the under-30 age group.
Respondents between the ages of 50 and 64 had a significantly better outlook, registering a Personal Credit Index score of 102, down 9 points, or 8 percent, from a month earlier.
Respondents who were 65 years or older posted a Personal Credit Index score of 114, up 2 points, or nearly 2 percent.
The survey also found that 63 percent of respondents said they expect to receive a tax refund from the federal government, while 21 percent reported anticipating that they will have to pay additional taxes.
The average expected refund is slightly more than $2,000, according to the survey.
Almost half of the respondents who expect a refund said they would use it to pay bills, while another 9 percent said they plan to make a special large purchase such as a car or furniture, and 6 percent said they would use the money for a vacation. Only 31 percent say they will save or invest the money.
