CHICAGO–During the third quarter of 2022 more consumers turned to unsecured personal loans and credit cards as a means to help stave off the financial pressures brought on by inflation, according to a new report from TransUnion.
TransUnion’s newly released Q3 2022 Quarterly Credit Industry Insights Report (CIIR) also shows that while delinquencies for most credit products remain in line with pre-pandemic levels, they continue to rise from the very low levels seen in 2021, particularly among subprime segments of customers.
“Consumers are being pressured on multiple fronts, first by this environment of high inflation, and secondarily by the higher interest rates that the Federal Reserve is implementing to tamp it down. However, as long as employment numbers remain strong, there should continue to be a steady flow of customers seeking access to new credit products, credit cards and personal loans in particular, and concurrently, an ample supply of lenders willing to offer credit to them,” said Michele Raneri, vice president of U.S. research and consulting at TransUnion. “Delinquencies remain in line with historical levels for most credit products. However, levels have been rising over the past year, particularly among subprime consumer segments, and should be monitored in the coming months to look for similar increases in other credit risk tiers.”
The Data Points
According to TransUnion:
- Credit card balances continue to grow, with bankcard balances reaching a record high of $866 billion in Q3 2022, which represents a year-over-year (YoY) increase of 19%. The increase was heavily driven by growth among Gen Z and Millennial borrowers, among whom balances grew by 72% and 32%, respectively.
- Private label balances are also at a record high, up 7.3% YoY. Private label total and average credit lines have also increased to record highs, as have average number of accounts per consumer.
- Delinquencies have risen and in Q3 2022 were slightly higher than the level seen pre-pandemic in Q3 2019. “Bankcard charge-offs, for now, continued to decline, down for the sixth consecutive quarter. Charge-off balances are showing an upward trend among private label after seven consecutive quarterly declines.”
- Unsecured personal loans have seen record growth in originations and balances in recent quarters. This growth has been fueled, in part, by significant increases in lending to below prime risk tiers. “This increase, combined with a general deterioration in the financial health of subprime consumers as a result of elevated inflation, has led to an increase in delinquencies, which have now surpassed pre-pandemic levels,” TransUnion said. “As lenders navigate increasing delinquencies, a high inflation environment, capital constraints, and a potential recession, lending to below prime risk tiers is likely to slow down in the last two quarters of 2022.”
Relative Stability
TransUnion reported its Credit Industry Indicator (CII) was relatively stable between Q2 and Q3 2022, ticking up one point to 120, but dropped from the prior year level of 126 in Q3 2021, largely driven by the rising delinquencies across many product categories. The CII is a quarterly measure of depersonalized and aggregated consumer credit health trends that summarizes movements in credit demand, credit supply, consumer credit behaviors and credit performance metrics over time into a single indicator. Examples of data elements categorized into these four pillars include: new product openings, consumer credit scores, outstanding balances, payment behaviors, and 100+ other variables, TransUnion said.
For additional information on each vertical or to register for the Q3 2022 Quarterly Credit Industry Insights Report Webinar, go here.
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