While the U.S. economy is showing signs of recovery, the average U.S. consumer remains in financial distress – despite a significant pullback in household spending.

These conclusions are among several key findings of the CredAbility Consumer Distress Index, a new quarterly measure that tracks shifts in the financial condition of the average American household and provides a comprehensive snapshot of the American consumer’s total financial picture over time.

The proprietary index is published by CredAbility, a national nonprofit credit counseling agency with 46 years of experience helping consumers in distress, long known as Consumer Credit Counseling Service of Greater Atlanta.

The agency just recently announced its name change to CredAbility – a move that better reflects the organization’s national presence as a credit counseling and education provider.

CredAbility’s new index uses a proprietary methodology that draws upon multiple data sets and analyzes consumers’ employment, housing, credit, household budget, and net worth information.

The index is based on a 100-point scale where a level of 70 or below indicates consumer financial distress, which the organization defines as “the condition where an individual or household is financially unstable and needs to take immediate action to address their problems.”

For the quarter ending March 2010, American households’ scored a 64.2 on the 100-point scale. CredAbility says this marks the seventh consecutive quarter of financial distress for the average American.

However, the index improved slightly compared to the previous quarter score of 63.9 – the lowest reading since 2006, the first year that the index covers. CredAbility attributes the modest quarterly increase to reduced household spending.

Based on the agency’s data, American households had their highest score – 78.7 – in March 2007. Since that

time, the index has dropped more than 14 points, led by rising mortgage delinquencies and foreclosures, and increased unemployment and under-employment, CredAbility says.

The index dipped below 70 – entering a state of financial distress – in September 2008, and has lingered in the mid-60s for the past six quarters.

“To gauge and test the index, we ran historical data from the beginning of 2006, when unemployment was low and the economy was growing,” said Mark Cole, CredAbility’s COO. “Our data show that the stress on household budgets was significant even then. The consumer had little to fall back on when housing and employment markets fell sharply.”

Cole says on the positive side, the distress index score has shown some signs of stabilizing over the last two quarters, which he says reflects both strengthening of household budgets and an improving employment market.

A more robust jobs market would certainly fare well for an American population enduring the aftershocks of the nation’s economic downturn – and for a housing industry still struggling with elevated delinquency numbers.

Scott Scredon, a spokesperson for CredAbility, explained to DSNews.com that the common denominator pushing consumers into a distressed situation is unemployment or diminishing income. Seventy percent of those counseled by the agency cite loss of job or income as the reason for their deteriorating financial situation – and for many this means the mortgage may go unpaid.

CredAbility provided credit counseling and education to more than 754,000 people across the United States last year. Of those, 120,000 were looking for help to stave off a foreclosure. Scredon says already, the number of borrowers CredAbility has assisted through the first three months of this year, puts the organization on pace to surpass the 2009 foreclosure aid figure by 5 percent.

Like most HUD-approved counseling agencies, CredAbility has direct lines into the loss mitigation departments of all major servicers. And, Scredon says that over time, CredAbility counselors have developed good working relationships with the servicing community, to the point that if they make that phone call on behalf of the homeowner, the servicer is assured there is a reasonable expectation that a solution can be reached.

One year after a consumer receives counseling services from CredAbility, the organization goes back and reviews credit reports and other data to check on their situation. Scredon says approximately 80 percent of those who’ve received foreclosure prevention counseling were still in their homes after one year.