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Only 30% of Americans Believe Checking Credit is Extremely Important Reveals TransUnion in New Study

Amid economic struggles across the globe, consumers in the US are trying to become more aware of their credit. Research from TransUnion has uncovered why this change in attitude has taken place, as 55 per cent of consumers look to open new credit accounts, 30 per cent want to better manage their debt and 15 per cent want to improve their credit scores.

The Global Credit Monitoring Study by TransUnion was conducted to better understand the distinct profiles, motivations and future outcomes of credit monitoring consumers. The study examined the behaviours of different consumers across the globe. Some notable markets included the United States, Brazil, Canada, Chile, Colombia, Dominican Republic, Guatemala, Hong Kong, India, Philippines, South Africa and United Kingdom.

To further identify how these benefits advance credit education and enable financial inclusion, the study used depersonalised credit data to analyse these outcomes for key consumer credit segments: new-to-credit, underserved, and credit-served consumers.

Charlie Wise, co-author of the study and head of global research and consulting at TransUnion
Charlie Wise, co-author of the study and head of global research and consulting at TransUnion

“Consumer credit monitoring has expanded considerably in awareness and usage over the past decade. This expansion has recently been fueled by the impact of the pandemic on consumer finances and the heightened familiarity among consumers of becoming victims of credit fraud,” said Charlie Wise, co-author of the study and head of global research and consulting at TransUnion.

“Our study measures the importance of credit education and quantifies the benefits that credit monitoring consumers experience. Furthermore, these benefits are shown to lead to better credit profiles, greater access to credit, or an improved ability to pay down debt, depending on the intent of consumers who monitor credit.”

Monitoring credit

The importance of monitoring credit has grown in the US in the last year. Over eight in 10 (86 per cent) of respondents said monitoring credit was at least moderately important with three in 10 saying it’s extremely important. Additionally, credit is being checked at least once per month by 58 per cent of respondents. Twenty-two per cent of respondents are checking it weekly and 10 per cent daily.

Users have signed up for credit services for a variety of reasons. TransUnion set out to find what goals US consumers had when signing up for credit monitoring services, as well as the actual benefits they have experienced.

The most common reasons US consumers initially signed up for credit monitoring services were that it was free (35 per cent), to improve their credit score (32 per cent), and to monitor their report for accuracy (31 per cent).

Additionally, after using monitoring services for some time, consumers reported added benefits that credit monitoring has allowed them to achieve: gain visibility to changes on their credit report (42 per cent), learn how to manage their credit score (41 per cent), detect fraud (39 per cent), and pay down debt (24 per cent).

The study further identified three distinct segments of credit-monitoring consumers based on their primary motivation for monitoring their credit. These included credit seekers, credit managers and credit improvers.

Credit seekers benefit from attaining new credit

More than half of the credit monitoring population (55 per cent) is doing so with a goal of attaining new credit. Credit seekers are consumers with near prime and above credit scores who monitor their credit with the intention of opening new credit accounts in the near future.

When comparing credit seekers who monitor their credit to those that do not, credit monitoring consumers open 1.16x more credit accounts, such as credit cards and auto loans, over the following year.

Both New-to-Credit (NTC) consumers – those early in their credit journeys – and underserved consumers – those less engaged in the credit market overall – also saw similar higher activity for the credit monitoring segment.

NTC consumers who monitor their credit display 1.21x higher origination rates for any credit product than those who do not monitor their credit, and for underserved it is 1.24x. Served consumers, those with established credit histories and readily available access to credit, saw an 1.14x higher rate of opening new accounts.

“For new-to-credit and underserved consumers, who typically have a more difficult time expanding their credit wallets, credit monitoring can be a crucial enabler of greater credit education and access,” said Wise.

Credit monitoring consumers in US open a higher percentage of credit cards, the most used credit product
 Credit Monitoring ConsumersNon-Monitoring Consumers*
Overall42%36%
New-to-Credit48%34%
Underserved55%50%
Served40%35%

* Non-monitoring consumers were analysed over the same time period from the date when credit monitoring consumers with similar credit profiles began monitoring services   

Credit managers benefit from paying down debt and detecting fraud

As debt levels have risen to near-record levels in recent years, the study found that many US consumers (30 per cent) monitor their credit with the intention of keeping an eye on their overall balances. Credit managers are defined as consumers with near prime and above credit scores who generally monitor their credit to reduce or maintain their balances or monitoring for fraud.

When surveyed, 24 per cent of all US credit monitoring consumers said they were able to pay down debt as a result of credit monitoring. In alignment, the study found that credit managers decreased their overall balances by an average of 11 per cent within a year after starting monitoring.

“Though we are in a high-interest rate environment with consumer credit balances at near-record levels, it’s reassuring to see so many Americans taking the initiative to ensure they are paying down or managing their debt levels,” added Wise.

Average balance decrease after one year of credit monitoring in the US
Overall– 11%
New-to-Credit– 19%
Underserved– 12%
Served– 11%

Another primary motivation reported by credit managers is protecting against fraud. Four in 10 US consumers (42 per cent) reported that they continue to utilise credit monitoring services over time in order to detect and protect against fraud. This benefit is of increased importance to consumers in light of the continued rise in fraud activity that has been observed since the onset of the COVID pandemic.

Credit improvers benefit from improving scores and staying current on obligations

Credit Improvers, which make up 15 per cent of the US credit monitoring population, are defined as consumers with subprime (poor) credit scores who likely use credit monitoring to understand their current credit situations and take steps to improve their credit scores.

The study found that credit improvers in the US generally experienced credit score improvements by an average of 28 points one year after they started monitoring their credit. The improvement was even better, at 35 points, for NTC consumers. In both instances, the improvement was better than a comparison set of consumers who do not monitor their credit (average 23-point improvements for both overall population and NTC consumers).

Median score improvement one year after starting credit monitoring in the US
Credit monitoring consumersNon-monitoring consumers*
Overall2823
New-to-Credit3523
Underserved2712
Served2622

* Non-monitoring consumers were analysed over the same time period from the date when credit monitoring consumers with similar credit profiles began monitoring services  

Lindsey Downing, head of TransUnion’s Consumer Interactive business
Lindsey Downing, head of TransUnion’s Consumer Interactive business

“While credit improvers make up the smallest segment of credit monitoring consumers in the US, they also tend to see some of the most impactful benefits in terms of credit improvement,” said Lindsey Downing, head of TransUnion’s Consumer Interactive business.

“It’s a clear indication that those consumers who are actively looking to improve their credit health may achieve better results if they monitor their credit and can plan their steps and track their progress.”

Free credit monitoring benefits consumers and lenders

In an effort to help more consumers easily access their credit scores, many financial institutions are offering free credit monitoring tools. This easy access not only helps consumers, but enables lenders to build stronger relationships with their customers.

Over one-third of US consumers (35 per cent) said they initially signed up for credit monitoring because it was free. One in three of these customers (32 per cent) stated they would prefer the lender providing free credit monitoring services over other lenders when opening new products. Twenty-one per cent said they would prioritise that lender’s payments over other lenders’ payments.

“Consumers now expect financial institutions to offer free credit monitoring services, as it allows them to improve their credit profiles, better manage existing credit, and seek new credit in the future. Offering such services clearly benefits financial institutions as many of their customers are more likely to remain loyal to them for future credit activity,” concluded Downing.

Author

  • Francis is a journalist and our lead LatAm correspondent, with a BA in Classical Civilization, he has a specialist interest in North and South America.

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