Access to Credit, Debt Balances Rise in Second Quarter: TransUnion Study


Consumers’ access to credit, as well as their debt balances, have increased, according to a recent TransUnion study. (Stock)

More consumers gained access to credit in the second quarter of this year and as a result, their debt load also increased, according to a recent report of Trans Union.

The number of consumers with credit cards and personal loans hit new records in the second quarter, according to TransUnion’s Quarterly Credit Industry Report.

“Consumers face several challenges that impact their finances daily, including high inflation and rising interest rates,” said Michele Raneri, vice president of US research and consulting. at TransUnion. “These challenges, however, are occurring in a context where job opportunities are still plentiful and unemployment levels remain low. We are seeing lenders providing greater access to credit to unprivileged consumers, some of whom are new to credit. ”

“This is a welcome development as more consumers gained access to credit at a time when high inflation weighed more heavily on their wallets,” Raneri said. “While delinquencies generally increase after a period of more unpreferred borrowers getting loans, delinquency rates mostly remain at or below pre-pandemic levels, particularly for cards and personal loans. .”

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Inflation drives Americans to use credit products

Loan growth to non-preferred borrowers, or Americans with credit scores between 601 and 660, increased in the second quarter, TransUnion said. This was mainly due to an increase in personal loans and credit cards, which were used more by consumers as inflation rose.

Inflation increased by 8.3% annually in August, down slightly from the month before but still near the highest in about 40 years, according to the Bureau of Labor Statistics (BLS).

The share of personal loan balances for subprime borrowers, or those with credit scores between 501 and 600, rose from 8.1% last year to 11.8% in the second quarter of 2022. And balances credit cards rose to 6.9% in the second quarter from 5.3% in the same period last year.

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Credit card and personal loan balances rise in second quarter

The number of consumers with access to a credit card rose to 161.6 million in the second quarter, from 153.3 million in the same period last year, according to TransUnion. The average balance on these credit cards in the second quarter of this year was $5,270 per consumer, compared to $4,817 last year.

As for personal loans, 21 million consumers had access to them in the second quarter, compared to 18.7 million in the same period last year. Average personal debt per borrower totaled $10,344 in the second quarter of this year, up from $9,079 last year.

“We saw positive trends in the credit card industry in the first half of 2022, with more younger and subprime borrowers gaining access to credit cards,” said Paul Siegfried, senior vice president and chief operating officer. TransUnion’s credit card business. “As serious chargebacks increase, this is to be expected when more consumers – many of whom are new to credit – get a credit card.

“On the positive side, serious delinquencies are far from a cause for concern,” Siegfried said. “The employment situation remains relatively strong, although rising interest rates and high inflation are putting increased pressure on consumers. Overall, it is positive for the credit ecosystem that young consumers have access to credit so they can build their credit profiles for the future.”

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