TransUnion Reports Inflation’s Rise Hitting Non-Prime Borrowers Hardest; Offers Forecast for What’s Ahead

As inflation continues to rise, non-prime borrowers – those consumers with the riskiest credit profiles – have generally experienced the greatest impact to their wallets, according to a new study.

The study from TransUnion, “Identifying Resilient Consumers During Inflationary Times,” found that non-prime borrowers have seen the greatest percentage rise in both credit balances and delinquency rates since early 2021, which coincides with the period when inflation has risen significantly, the company noted.

“While the study pointed to the impact of inflation on consumer wallets, it also highlighted how increases in delinquency levels on many lending products leave current rates near or below levels observed at the end of 2019, prior to the COVID-19 pandemic,” TransUnion said.

Furthermore, the company noted the study found that even though credit balances are rising, more consumers are making payments each month over their minimum due amounts, an indication of consumer resiliency. 

“Elevated inflation also appears to have negatively impacted payments of credit cards – the most widely used credit product,” according to TransUnion. “Consumers with recent card originations entered early default at a higher level compared to 2019. For instance, 8.53% of subprime borrowers with VantageScore 4.0 scores between 580-600 who opened a credit card in October 2021 became 30+ days past due on their account three months after origination. For October 2019 originations, this rate was 6.92%.

The company added that it is important to keep in mind that, even with these recent increases, overall delinquency levels for most products remain below pre-pandemic levels.

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