Credit Card Lenders Had a Banner Year in 2021 – Why It’s Good News for High-Risk Applicants
Consumer credit performance holding steady at healthy levels in autos, credit cardpersonal loans and mortgages, lenders continued to accelerate the growth of new account creation in secondary segment of the market towards the end of 2021, according to a report from TransUnion.
The Transunion Q4 2021 Credit Industry Insights Report (CIIR) quarterly report also revealed that lending to non-preferred borrowers increased, while accounts created during the pandemic in 2020 continued to perform as well or better compared to lending for years. previous ones.
Amid the pandemic, below-premium consumer lending was phased out, but the situation turned around sharply in 2021, according to the report. Lenders moved as the economy grew and consumer credit was healthy, accelerating the growth of new account openings in the unpreferred segment. In particular, the credit card market saw a very high rate of new account growth in the third quarter of 2021 with a record 20.1 million shows, including 9 million for unprivileged consumers, according to the report.
In turn, this translated to overall card issuance growth of 63% in the quarter, while non-core issuance was up 75% year over year, compared to 5, 1 million non-core issues occurred in Q3 2020.
Charlie Wise, senior vice president of research and consulting at TransUnion, told GOBankingRates that non-senior lending in the credit card market rebounded strongly in the third quarter of 2021 and year-on-year growth rates the other were likely so high due “to the fact that card issuers had pulled back in this consumer segment during the height of the pandemic when there was more uncertainty in the market.”
The report notes that “there was a lot of uncertainty in the early months of the pandemic,” and many lenders chose to take a wait-and-see approach. In addition to the uncertainty, there were questions about the increase in the number of consumers in loan adjustment programs and how these consumers would perform once they left these programs.
“Toward the end of 2021, the majority of hosting programs expired and lenders found that consumers continue to meet their credit obligations well,” the report notes.
Wise added that Transunion expects lending to this segment to continue so volumes are in line with pre-pandemic levels.
Additionally, despite recent increases in delinquency over the past quarter, severe delinquency rates have also remained near or below pre-pandemic levels following the expiration of forbearance programs, which has continued to restore lender confidence.
Wise explained that the main drivers of low delinquencies included forbearance programs and government stimulus programs which helped keep them low during the height of the pandemic.
“Now that the majority of forbearance programs have expired, consumers have started making payments again, which is a sign of a healthy economy. This has restored lender confidence, which has helped lenders get back into business. the non-senior loan segment,” added Wise.
Finally, the report notes that card balances are showing a slight improvement from a year ago, with average balances still lower than what was seen before the pandemic.
“The growth in balances that has occurred has come primarily from super prime consumers and as such, card issuers are aligning their growth strategies with these behaviors by offering higher credit lines to these consumers,” according to the report. . “Card issuers are also tapping into new consumer risk segments to accelerate their growth. Emissions to secondary consumers increase and consumer performance remained stableespecially from a historical point of view.
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This article originally appeared on GOBankingRates.com: Credit Card Lenders Had a Banner Year in 2021 – Why It’s Good News for High-Risk Applicants