Credit access, debt balances rise in Q2: TransUnion study

Consumers' access to credit, as well as their debt balances, have risen, according to a recent TransUnion study. (iStock)

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

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

"Consumers are facing several challenges that are impacting their finances on a day-to-day basis, namely high inflation and rising interest rates," Michele Raneri, TransUnion's vice president of U.S. research and consulting, said. "These challenges, though, are happening against a backdrop where employment opportunities are still plentiful and jobless levels remain low. We see lenders offering more access to credit to non-prime consumers, some of whom are new to credit." 

"This is a welcome development as more consumers have gained access to credit during a time when high inflation has placed a greater burden on their wallets," Raneri said. "While delinquencies generally rise after a period when more non-prime borrowers secure loans, the rates of delinquency remain mostly 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-prime borrowers, or Americans with credit scores between 601 to 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 surged.

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

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

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Credit card, personal loan debt balances rise in Q2

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

When it came to personal loans, 21 million consumers had access to one in the second quarter, up from 18.7 million at the same time last year. The average personal loan debt per borrower totaled $10,344 in the second quarter of this year, up from $9,079 last year. 

"We observed positive trends in the credit card industry in the first half of 2022, with more younger and subprime borrowers gaining access to credit cards," Paul Siegfried, TransUnion's senior vice president and credit card business leader, said. "While serious delinquencies are rising, that is to be expected when more consumers – many of whom are new to credit – secure a credit card. 

"On the positive side, serious delinquencies are nowhere near concerning levels," Siegfried said. "The employment picture still remains relatively strong, though increased interest rates and high inflation are placing more pressure on consumers. Overall, it’s a positive for the credit ecosystem to have younger consumers gain access to credit so they can build their credit profiles for the future."

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