Experian-Gallup Survey Shows Many Consumers are Not Prepared for a Katrina-Like Disaster

Hurricane Katrina not only revealed a lack of preparedness on the part of federal, state and local officials to deal with a major disaster, but it also highlights a similar lack of preparedness among much of the general public, according to the latest Experian-Gallup Personal Credit Index(SM) survey. More results for the Personal Credit Index(SM) can be found at www.PersonalCreditIndex.com.

“Although it may seem overwhelming to prepare both physically and financially for a major disaster, there are many small steps consumers can start taking now that can add up quickly in a very short period of time,” said Ed Ojdana, group president of Experian Interactive(SM). “It’s great to see from our recent survey that most consumers have many of the basic physical needs, but it’s troubling to see the number who are not financially prepared.”

Four in 10 consumers say they are not at all prepared (23 percent) or not too prepared (18 percent) for a natural disaster like Hurricane Katrina. Another 43 percent say they are somewhat prepared while only 15 percent say they are very prepared for such a disaster. Most consumers have many of the basic items they might need in an emergency: 95 percent have flashlights, 90 percent have food, and 85 percent have batteries. About three in four have a portable radio (77 percent), a first-aid kit (73 percent) and bottled water (71 percent). Two in three (65 percent) say they have their credit card numbers, bank account numbers and other financial information in one place.

Just 51 percent of the population has an emergency fund in case their income suddenly stops. Of those who have an emergency fund, two in three (69 percent) have cash on hand in case of an emergency. Of those with cash on hand, only 27 percent say they have $1,000 or more. Three in four consumers (75 percent) say they would use their savings account as a source of money in case of an emergency, while 56 percent say they would use their credit cards, and 50 percent say they would borrow money from a family member. Thirty-seven percent say they would use their home-equity account as a source of money in case of an emergency, and 39 percent say they would use their 401(k) retirement account.

Now that the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 is about to take effect, Experian® and Gallup asked consumers about some aspects of the bankruptcy process. The new law makes the most comprehensive changes in decades, affecting both consumer and business bankruptcies.

Two in three consumers say that the victims of Hurricane Katrina who lost their homes should be able to file for bankruptcy more easily than current law allows. One in four consumers thinks that filing for bankruptcy stays on a credit report for six years or less, 63 percent believe it stays on a credit report for seven to 10 years, and 6 percent believe it stays for 11 years or more. Two in three (67 percent) consumers believe people who file for bankruptcy are likely to keep their house. About half (53 percent) believe that when someone files for bankruptcy, his or her credit score drops and it is difficult, but not impossible, to obtain credit.

“Consumers should be aware that the new bankruptcy law goes into effect on October 17,” added Ojdana, “and the new law will make it tougher for consumers to be eligible to file for Chapter 7, which dismisses all unsecured debts included in the filing.”

The Experian-Gallup Personal Credit Index is now at 78, essentially unchanged from the 77 of the previous month. The Personal Credit Index was benchmarked at 100 in March and has been at its lowest point of the year for the past two months. Consumer ratings of their current credit situation and their expectations for their future credit situation are both down significantly from March.

“In the wake of Hurricane Katrina, rising gas prices and interest rates, it’s not surprising that consumers are feeling less than optimistic about their current and future credit situation,” said Dennis Jacobe, chief economist for The Gallup Organization. “The Personal Credit Index will likely stay low until economic conditions start to improve.”

More information about the Experian-Gallup Personal Credit Index can be found on the official Web site at www.PersonalCreditIndex.com.