Report: Consumer Credit Health Remains Relatively Strong in Opening Quarter of 2022

    CHICAGO (Globe Newswire) — Rising interest rates and the increased prices of goods and services placed pressure on the consumer wallet in the opening quarter of 2022. Despite the challenges, consumers remain well positioned from a consumer credit perspective, according to TransUnion’s (NYSE: TRU) newly released Q1 2022 Quarterly Credit Industry Insights Report (CIIR).

    During the course of the COVID-19 pandemic, consumer performance remained relatively strong as stimulus funds, forbearance and accommodation programs provided consumers with a safety net during a period of great uncertainty. Now that pandemic financial programs have ended, new challenges such as inflation and rising interest rates are starting to have an impact on consumer spending power.

    While prices are increasing, consumer spend has not yet recovered to the pre-pandemic levels. The CIIR found that in Q1 2022 the average credit card balance hovered around $5,010. While this was a 4.7% increase over Q1 2021 ($4,784) it still lagged 11% behind the average balance in Q1 2020 ($5,637). Total credit card balances for the industry are $769 billion, which is 5.5% below the $814 billion observed in Q1 2020.

    In addition to consumer spend approaching pre-pandemic levels, consumer liquidity also remains stable. Aggregate excess payment (AEP) – the excess amount a consumer makes over the minimum amounts due on all their credit accounts – is typically an indication of a consumer’s ability to manage their overall debt payments. In Q1 2022, average AEP was $328, remaining relatively flat from the $326 observed in Q1 2021. The current level remains above the average AEP levels seen pre-pandemic.

    Consumers are Paying More Toward Their Monthly Bills

    QuarterQ1 2022Q1 2021Q1 2020Q1 2019Q1 2018
    Average Reported Aggregate Excess Payment per Consumer$328$326$318$312$307
    Source: TransUnnion

    “Compared to a year ago, the price of everything from filling a gas tank to buying a carton of eggs has increased due to inflation. Since wages of many consumers have not kept up with inflation, people are spending more to get less. However there are several positives to note, including low unemployment, lenders increasing access to credit, and strong consumer performance,” said Michele Raneri, vice president of research and consulting at TransUnion. “These are all indications that consumers are well positioned as the economy continues to find its footing from the financial volatility of the pandemic.”

    Another sign that consumer credit health remains healthy: TransUnion’s Credit Industry Indicator (CII) increased to 116 in Q1 2022 – up from 115 in the previous quarter and 105 one year ago. The CII offers a comprehensive view of consumer credit health through aggregated credit data, including supply, demand, usage and performance, to show the overall picture of whether the credit market is improving or deteriorating. It also provides a view of the impact of economic market events, including inflation, on consumers.

    In addition to consumer credit health maintaining a healthy level, there has not been a material impact to consumer performance. Serious delinquency rates across mortgage, auto, credit card and personal loans have stayed relatively flat in the wake of expired forbearance programs or rolled back accommodation programs.

    “Consumers are continuing to perform well on their credit and debt obligations – even when faced with several macroeconomic factors that are influencing affordability. Factors such as rising interest rates could affect the monthly payment amounts for some consumers, but we are currently seeing that they are continuing to make payments, sometimes even in excess, of what is required,” said Raneri.