First steps are often small and hesitant, but generally precede a more confident stride.  We can hope so.  Apparently U.S.households took a baby step out of financial distress during the first quarter of this year, according to the numbers released yesterday by CredAbility.  The non-profit counseling agency said its Consumer Distress Index hit its highest score in two and a half years, indicating that household financial distress is beginning to ease.

The index measures financial distress in five categories:  employment, housing, credit, household budgets, and net worth.  Average American households are queried and scored on a 100 point scale – the higher the score, the lower the level of financial woes with a score below 70 indicating financial distress.  So a score of 68.15 doesn’t sound like a lot to cheer about, but that is up from a score of 67.2 in the last quarter of 2010.

“I believe a new trend is emerging,” said Mark Cole,COOof the Atlanta-based counseling organization. “Our index has increased by four points in the last five quarters, an indication that the averageU.S.household is getting financially healthier [and] that the majority of consumers are on the right track.”

The positive direction of the index is credited to increased employment rates, but it was no surprise to me that the category dragging down the overall score continues to be housing.  The housing score in fact dropped in the first quarter of this year, indicating that mortgage delinquencies are still a major problem for American households.

So pay attention banks;  if you want us all out there spending money and using credit you’ve got to cut loose the ball and chain holding back our baby steps.  The quicker you cut your mortgage losses, the sooner we’ll all reap the rewards of moving up and out of the distress zone.  Principal reduction, anyone?

Advertisement