CHICAGO –The newly released Q2 2023 Quarterly Credit Industry Insights Report (CIIR) from TransUnion shows that relative to the consumer population as a whole, Gen Z consumers (born between 1995 and 2005) “continue to turn to bankcards and unsecured personal loans even as lenders have begun to tighten underwriting.”
TransUnion reported its most recent Consumer Pulse findings from July 2023 found that 50% of Gen Z borrowers – compared to 32% for the entire population – are planning to apply for new credit or refinance existing credit (e.g., student loan, credit card, personal loan, car loan/lease, mortgage) within the next year.
This percentage is a marked increase from the 41% of Gen Z consumers who said they planned to apply for credit or refinance in the July 2022 report, TransUnion stated.
‘Makes Sense’
“It makes sense to see Gen Z consumers’ use of credit cards and personal loans increase relative to consumers as a whole as they age into financial independence,” said Michele Raneri, vice president of U.S. research and consulting at TransUnion. “Like the overall population, many Gen Z borrowers are facing the same financial challenges brought on by high interest rates and inflation. As a result, they are tapping into these available credit products to help them cope with rising expenses and the tightening of their monthly budgets.”
New Record High
According to TransUnion, bankcard balances once again reached a new record high of $963 billion in Q2 2023, up 17.4% year-over-year (YoY). Among Gen Z consumers, total balances increased 55% YoY and now stands at $55 billion, representing 5.7% of all balances.
Unsecured personal loan origination fell overall YoY for the second consecutive quarter, down 16.1%. Within the overall population, originations among Gen Z consumers were 493K in Q1 2023, representing a smaller 7.6% decrease YoY, TransUnion stated.
Less Risky Credit Tiers
“The report also found that lenders are continuing to increasingly focus on less risky credit tiers when considering new originations across a number of credit products, particularly impacting subprime borrowers,” TransUnion said. “For instance, auto originations in Q1 2023 were down 11.6% among subprime borrowers YoY – and down 21.3% as compared to pre-pandemic 2019. Among unsecured personal loans, subprime originations for Q1 2023 were down 26.1% YoY.”
For additional information, TransUnion will host a Q2 2023 Quarterly Credit Industry Insights Report webinar.
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