The report warns that up to 7.8 million people may struggle to cope with a $200 increase in the cost of living, which may result in inability to keep up debt repayments. A $500 increase could see 9.6 million consumers impacted.
With inflation still not under control, debt levels are expected to continue higher but at a higher cost due to increased interest rates.
“We’ve seen an increase in minimum payment amounts of up to 10% in the first half of 2022, depending on the combination of products consumers hold, along with a slight deterioration in payment behaviours,” said Matt Fabian, director of financial services research and consulting at TransUnion.
Who’s borrowing what?
The report shows that 5.1% of those consumers with a strong credit profile – the super prime cohort – continued to build their credit balances, along with a 4.8% increase among sub-prime borrowers.
“During the pandemic we saw a decline in credit participation among below prime consumers, so this marks a re-engagement of this segment as potentially the effects of inflation and interest rates have driven demand, while lenders have increased their risk appetite in this space,” Fabian added.
