TransUnion Predicts “A Good Year for Consumer Credit” in 2020

TransUnion researchers analyzed macroeconomic conditions and their impact on credit cards, personal and auto loans, and mortgages to predict that 2020 will be a good year for consumer credit, with low delinquencies and strong growth for most sectors. This prediction runs contrary to those who believe that the United States is moving towards difficult economic times.

Matt Komos, vice president of financial services research and consulting for TransUnion, told American Banker that their analysis “doesn’t indicate that a recession is on the horizon. Given that, we feel the consumer credit market is going to continue in a healthy manner and continue a lot of the trends we’ve seen over the last couple of years.”

Komos also stated that lenders, including financial technology firms, have been providing access to credit with measured means. Fintechs own roughly 40 percent of all personal loan balances, and “have cracked into something consumers are responding to, and it relates to what we call the ‘consumer first’ era ⎼ the idea that the consumer is in the driver’s seat today.”

Financial technology firms typically use artificial intelligence and alternative data in their lending decisions. TransUnion expects the delinquency rate for unsecured personal loans to reach 3.04 percent, the lowest rate in the last five years, which may be a signal that tech firms are appropriately managing their risk when making lending decisions.

The credit bureau also sees a number of factors making  buying homes more affordable, which they see leading to mortgage growth from first time homebuyers and a decline in mortgage delinquencies. These factors include low unemployment, rising wages, low interest rates and slowing home price appreciation. As a result, TransUnion sees mortgage delinquencies hitting a five-year low in 2020.

Auto loan delinquencies are predicted to decrease slightly to 1.44 percent from the 1.47 percent that was expected in 2019.