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Consumers’ Financial Health Takes Hit in Third Quarter

A deteriorating housing picture, coupled with an increase in expenses and a drop in consumer confidence, led to a sharp decline in consumers' financial health during the third quarter.

[IMAGE] The nonprofit credit counseling agency ""CredAbility"":http://www.credability.org puts out a regular quarterly index measuring consumer distress. Between July and September, the gauge recorded its largest drop since the third quarter of 2008.

U.S. households scored 66.7 on the index's 100-point scale for Q3 2011. That's down from a distress index level of 69.2 just three months earlier. A score below 70 indicates a state of financial distress.

CredAbility's data show the average consumer has been in distress for 12 straight quarters now.

The drop in the third quarter index breaks a string of rising scores in five of the past six quarters. In fact, the agency's COO Mark Cole says the fragile gains made


during the past year-and-a-half have been completely swept away in a single quarter.

“The mortgage delinquency rate is no longer improving and household budgets are being squeezed by rising gas and food costs. Unless consumers are willing to borrow, they’ll need to scale back their holiday spending,” Cole warned.

Mortgage delinquencies, late payments by apartment dwellers, and housing expenses as a percentage of gross income all increased during the quarter, according to CredAbility’s report.

At the same time, the agency says rising prices for food and gasoline meant consumers had less discretionary income.

On top of all that, even though the unemployment rate remained steady, the under-employment rate increased as the number of persons working part-time for economic reasons increased by 700,000 to 9.3 million in the third quarter.

CredAbility says ""among individual states"":http://www.credability.org/en/about-credability/media-center/Consumer-Distress-Index/default.aspx, Nevada had the lowest distress index score at 59.70, followed by Mississippi, Michigan, Georgia, and Alabama.

Only 19 states and the District of Columbia had scores higher than 70. North Dakota had the highest index score at 81.4.

CredAbility’s quarterly index tracks the financial condition of the average U.S. household by measuring five categories: employment, housing, credit, how families manage household budgets, and net worth.

About Author: Carrie Bay

Carrie Bay is a freelance writer for DS News and its sister publication MReport. She served as online editor for DSNews.com from 2008 through 2011. Prior to joining DS News and the Five Star organization, she managed public relations, marketing, and media relations initiatives for several B2B companies in the financial services, technology, and telecommunications industries. She also wrote for retail and nonprofit organizations upon graduating from Texas A&M University with degrees in journalism and English.

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