Report Reveals Most of America Still in Financial Distress

Non-profit credit counseling and education agency, CredAbility, released its 2010 Second Quarter Consumer Distress Index report. The Consumer Distress Index tracks financial condition of the average American household and organizes the information using a 100-point scale. Any score below 70 points is considered “a state of financial distress.” This quarter, which ended on June 30, 2010, United States households scored a 65.2 on the index’s scale.

While this score has increased from 65.0 points from last quarter, the second quarter report found high levels of unemployment and that the strain of household costs was keeping consumers in financial distress. This marks the fifth quarter that American consumer’s net worth has increased and can be attributed to consumers finally paying down debit and the stabilization of housing prices in some parts of the country.

“The average American remains gripped by financial distress,” said Mark Cole, CredAbility’s chief operating officer and executive responsible for the CredAbility Consumer Distress Index.  “The modest improvements we see in housing and net worth show incremental, but positive signs of stabilization. But to use a medical analogy, the patient is still in critical condition.  Until housing and employment markets improve significantly, we cannot expect to see significant recovery in these numbers.”

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The Consumer Distress Index researched distress scores for all 50 states and the District of Columbia. The results exposed severe regional differences. The only states to receive Index scores above 70 points, nine states in all, were mostly in the Midwest of the country. North Dakota received the highest score at 78.95 points. Other states that ranked highly include South Dakota, Nebraska, Wyoming, Iowa, and Kansas. However, these states only account for four percent of the entire United States population. The rest of the country’s 41 states and the District of Columbia are still considered in distress. Mississippi received the lowest score at 60.62 points, followed by Florida (61.01), Michigan (61.01), and South Carolina (61.29).

But stabilization may be on the horizon thanks to modest improvements in housing and net worth, though most states are still in critical condition. In order to completely recover, the employment and housing markets will need to make vast improvements. For a detailed explanation of how the index works, visit here.

Written by Kelly Mellott

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