Rising Inflation Impacting Non-Prime Borrowers Most

As rapidly rising gasoline, energy and utility prices drive inflation, non-prime borrowers with the riskiest credit profiles have generally experienced the greatest impact to their wallets, reported TransUnion, Chicago.

The TransUnion study, Identifying Resilient Consumers During Inflationary Times, found 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 study pointed to the impact of inflation on consumer wallets and 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 also found that even though credit balances are rising, more consumers are making payments each month over their minimum due amounts, which it said indicates consumer resiliency.

“Inflation is expected to remain high through at least the end of 2022. Its impact on consumer wallets is clear–balances are rising and we are seeing an uptick in delinquency rates,” said Charlie Wise, Senior Vice President and Head of Global Research and Consulting at TransUnion. “Our study determined that consumers in varying credit risk tiers and with different product types will face unique impacts. One of the key conclusions from the study is that while a prolonged, elevated inflation environment will negatively impact many consumers, serious delinquency rates will generally not rise above levels seen prior to the pandemic, even under worst-case inflation scenarios.”

Wise noted consumer credit markets will likely see more positive credit behavior after inflation abates.