Credit card delinquency rates for new users were higher than for those with established credit

Consumer credit increased by more than $20 billion by the end of 2022. (iStock)

In light of a volatile interest rate environment, millions around the globe opened their first credit products in the past two years, a new study found. 

And in the U.S., many new borrowers’ ability to pay off debt was slightly less favorable than that of more established credit-served customers, according to the Empowering Credit Inclusion study by TransUnion.

New-to-credit (NTC) consumers who opened credit cards over the last two years reflected higher credit card delinquency rates after the first six months following opening their accounts, compared to people with established credit and similar credit scores who opened new credit cards during the same time period, the report found.

The credit card delinquency rate for near-prime NTC consumers was 3.4% compared to 2.2% for near-prime consumers with established credit. For prime NTC consumers, the delinquency rate was 1.2% compared to 0.7% for prime users with established credit. 

In the United States, 5.8 million consumers opened their first credit product in 2021, the study found. And another 3.0 million became NTC through the first half of 2022. Credit cards were typically the first credit product new borrowers opened, TransUnion reported.

If high-interest credit card debt is troubling you, consider paying it down with a personal loan at a lower interest rate to help you reduce your monthly payments. You can visit Credible to compare offers from multiple lenders at once, without affecting your credit score.

Credit card balances hit record high amid inflation: TransUnion

Credit card delinquencies expected to reach record levels in 2023 

As a volatile market and price increases for basic goods remain concerns among many Americans, delinquency rates for credit card debt in the U.S. may spike in 2023. In fact, credit card delinquency rates may reach levels not seen since 2010, according to the 2023 Consumer Credit Forecast by Transunion.

"Rapidly increasing interest rates and stubbornly high inflation combined with recession fears represent the latest in a series of significant challenges consumers have faced in recent years," Michele Raneri, the vice president of U.S. research and consulting at TransUnion, said in the forecast report. "It’s not surprising then to see pronounced increases in delinquency rates for credit card and personal loans, two of the more popular credit products." 

Serious credit card delinquencies are expected to rise to 2.6% at the end of 2023, TransUnion projects. That's up from 2.1% at the end of 2022. Despite these forecasts, the credit bureau expects demand for credit to remain high into 2023. However, consumer optimism may remain high as well. 

"Despite a challenging macroeconomic environment, TransUnion’s new Consumer Pulse study found that more than half (52%) of Americans are optimistic about their financial future during the next 12 months," TransUnion said in its forecast report.

If you’re struggling with high-interest credit card debt, consider paying it off with a personal loan at a lower interest rate. You can visit Credible to speak with a personal loan expert and see if this option is right for you. 

Credit card debt carried over monthly is most  common type of debt: AARP

Americans may keep using credit cards amid high inflation 

Americans may open credit cards in record numbers during 2023, according to industry experts.

"The number of new cards opened will remain much higher than at any time in the last decade," TransUnion said in its forecast report. 

Of the 26% of Americans who said they plan to apply for new credit products, more than half (53%) expect to seek new credit cards, according to TransUnion’s consumer pulse survey.

"It’s clear that new-to-credit borrowers around the globe and in the United States will play a large role in the growth of many lenders’ books of business," Raneri said in a statement. 

If high-interest debt is preventing you from saving more for retirement, you could consider paying it off with a personal loan at a lower interest rate. You can visit Credible to get your personalized rate without affecting your credit score. 

Credit card debt prevents nearly 20% of Americans from becoming homeowners

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