Standard & Poor’s and Experian together will be launching a series of consumer credit default indices.
The S&P/Experian Consumer Credit Default Indices, to be launched on May 18, aims to measure the balance-weighted proportion of consumer credit accounts that go into default for the first time each month.
Unlike other publicly released metrics that recount previously defaulted loans or that measure delinquency rates only on securitized loans, the S&P/Experian Consumer Credit Default Indices are based on a broad cross-section of the entire U.S. consumer credit population.
The S&P/Experian Consumer Credit Default Indices will comprise four headline indices as determined by loan type, and a composite index: S&P/Experian Auto Default Index, S&P/Experian First Mortgage Default Index, S&P/Experian Second Mortgage Default Index, S&P/Experian Bankcard Default Index, and S&P/Experian Consumer Credit Default Composite Index. The balance-weighted Composite Index will measure default rates across all four loan types.
The granular indices by geography (at the Metropolitan Statistical Area, state, census division and census region levels) will be available, as well as custom indices that can be created based on specific client requirements.
“Built from the monthly payment data generated by the lenders and aggregated by Experian, these Indices will provide a timely, detailed look into the actual payment behavior of U.S. consumers,” says David Blitzer, managing director and chairman of the Index committee at S&P Indices. “In addition, since the Indices will allow us to get a pulse on the current default profile of consumers, they could also serve as a leading indicator on the direction of the U.S. economy.”
These Indices are calculated based on data extracted from Experian’s consumer credit database, which is is populated with individual consumer loan and payment data submitted by lenders to Experian every month. Experian’s base of data contributors includes leading banks and mortgage companies, and covers approximately $11 trillion in outstanding loans sourced from 11,500 lenders. These lenders report to Experian based on billing cycles, which are spread throughout a month. All these data are aggregated monthly as of the archival date, which is the last Saturday of every month. The index values are then published on the 3rd Tuesday of the following month.
“Experian is committed to providing the market with transparent and relevant information regarding the health of the U.S. consumer credit population,” says Ethan Klemperer, general manager of Experian Capital Markets. “The S&P/Experian Consumer Credit Default Indices offer a clean, true measure of loan losses worthy of being the standard benchmark for analyzing the changing payment behaviors of borrowers.”