TransUnion Global Study Finds More Than Half of U.S. Consumers Use Credit Monitoring to Open New Credit Accounts

Rhea-AI Summary

A new TransUnion study found that more than 100 million U.S. consumers monitored their credit data from TransUnion between 2018 and 2023. The study revealed that consumers monitor their credit for reasons such as opening new credit accounts, managing debt levels, and improving credit scores. The study also identified distinct segments of credit monitoring consumers and quantified the benefits they experienced. These benefits include greater access to credit, improved ability to pay down debt, and better credit profiles.

Insights

Financial Analyst

The enrollment of over 100 million U.S. consumers in TransUnion's credit monitoring service underscores the growing awareness and necessity of financial health management. The study's revelation that credit monitoring correlates with higher credit account origination rates among consumers, particularly new-to-credit and underserved segments, highlights a significant market opportunity for financial institutions. It suggests that credit monitoring tools could be leveraged as customer engagement and retention strategies. Notably, the 1.16x increase in credit account openings for Credit Seekers who monitor their credit versus those who do not could be indicative of a more proactive and informed consumer base, which is beneficial for lenders. Furthermore, the preference for lenders offering free credit monitoring suggests a competitive advantage in customer loyalty and acquisition.

From a macroeconomic perspective, the increased access to credit and subsequent origination could stimulate consumer spending and contribute to economic growth. However, this must be balanced against the potential risks of higher consumer indebtedness, especially in a high-interest rate environment. The data on debt management and fraud detection also imply that credit monitoring services may play a role in mitigating credit risk, which is crucial for maintaining the health of the credit ecosystem.

Market Research Analyst

The segmentation of credit monitoring consumers into Credit Seekers, Credit Managers and Credit Improvers provides valuable insights into consumer behavior and motivations. The study's findings that 58% of consumers monitor their credit at least once per month, with a significant portion checking weekly or daily, reflect a heightened consumer engagement with personal financial data. This trend is likely to influence how financial products are developed, marketed and personalized, emphasizing the importance of user-friendly financial tools that empower consumers.

Moreover, the reported benefits of credit monitoring, such as improved visibility, fraud detection and debt reduction, suggest that these services contribute to a more financially literate and responsible consumer population. This could lead to a decrease in default rates and more stable credit markets. For businesses, understanding these consumer segments and their outcomes can inform targeted marketing strategies and product development, focusing on personalization and value-added services that align with consumer needs and preferences.

Consumer Behavior Specialist

The motivations and reported benefits of credit monitoring services, as outlined in the study, highlight the psychological aspect of financial management. The fact that a significant number of consumers signed up for credit monitoring because it was free suggests price sensitivity and the appeal of perceived value. Additionally, the data indicating that consumers who monitor their credit report improvements and better manage their debt levels suggest that credit monitoring may serve as a psychological nudge, encouraging more responsible financial behavior.

The preference for lenders that offer free credit monitoring services also implies that consumers value and reward transparency and supportive services from financial institutions. This could influence consumer loyalty and trust, which are critical components of customer relationship management. Financial institutions could capitalize on this by integrating credit education and management tools into their service offerings to enhance customer engagement and satisfaction.

Study also measures how underserved and new-to-credit consumers significantly benefit from monitoring their credit

CHICAGO, Jan. 31, 2024 (GLOBE NEWSWIRE) -- More than 100 million U.S. consumers enrolled in a service to monitor their credit data from TransUnion (NYSE: TRU) between the start of 2018 and September 2023. A new TransUnion global study found that the motivations of consumers monitoring their credit differ, with the majority of Americans doing so with a near-term goal of opening a new credit account (55%). Three in 10 U.S. consumers (30%) monitor their credit to better manage their debt levels, while 15% seek to improve their credit scores.

To better understand the distinct profiles, motivations and future outcomes of credit monitoring consumers, TransUnion conducted a global research study examining credit behaviors for millions of consumers in both developed and developing markets, including 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 depersonalized credit data to analyze these outcomes for key consumer credit segments: new-to-credit, underserved, and credit served consumers.

“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. 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.”

In the U.S., 86% of surveyed consumers stated that it is at least moderately important to monitor their credit, with three in 10 saying it’s extremely important. More than half of consumers (58%) report monitoring their credit at least once per month, with 22% and 10% checking weekly and daily, respectively.

TransUnion surveyed consumers to understand their initial intent to sign up for credit monitoring services, and the actual benefits they have experienced in doing so. The most common reasons U.S. consumers initially signed up for credit monitoring services were that it was free (35%), to improve their credit score (32%), and to monitor their report for accuracy (31%).

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%), learn how to manage their credit score (41%), detect fraud (39%), and pay down debt (24%).

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%) 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 U.S. Open a Higher Percentage of Credit Cards, the Most Used Credit Product
	Credit Monitoring Consumers	Non-Monitoring Consumers*
Overall	42%	36%
New-to-Credit	48%	34%
Underserved	55%	50%
Served	40%	35%

^{* Non-monitoring consumers were analyzed 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 U.S. consumers (30%) 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 with the goal of reducing or maintaining their balances or monitoring for fraud.

When surveyed, 24% of all U.S. 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% 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 U.S.
Overall	- 11%
New-to-Credit	- 19%
Underserved	- 12%
Served	- 11%

Another primary motivation reported by Credit Managers is protecting against fraud. Four in 10 U.S. consumers (42%) reported that they continue to utilize 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% of the U.S. 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 U.S. 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 U.S.
	Credit Monitoring Consumers	Non-Monitoring Consumers*
Overall	28	23
New-to-Credit	35	23
Underserved	27	12
Served	26	22

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

“While Credit Improvers make up the smallest segment of credit monitoring consumers in the U.S., 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 are able to 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 U.S. consumers (35%) said they initially signed up for credit monitoring because it was free. One in three of these customers (32%) stated they would prefer the lender providing free credit monitoring services over other lenders when opening new products; and 21% said they would prioritize 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.

For more information about TransUnion’s global credit monitoring study, click here. Consumers interested in obtaining their TransUnion credit report, credit score, and accessing additional credit planning tools can visit here. Businesses interested in enabling consumers to better manage their credit health, protect their identities and control their financial futures can visit TransUnion’s TruEmpower™ solution line website.

About TransUnion (NYSE: TRU) 
TransUnion is a global information and insights company with over 13,000 associates operating in more than 30 countries. We make trust possible by ensuring each person is reliably represented in the marketplace. We do this with a Tru™ picture of each person: an actionable view of consumers, stewarded with care. Through our acquisitions and technology investments we have developed innovative solutions that extend beyond our strong foundation in core credit into areas such as marketing, fraud, risk and advanced analytics. As a result, consumers and businesses can transact with confidence and achieve great things. We call this Information for Good^® — and it leads to economic opportunity, great experiences and personal empowerment for millions of people around the world. http://www.transunion.com/business

Contact	Dave Blumberg TransUnion
E-mail	david.blumberg@transunion.com
Telephone	312-972-6646

 

FAQ

How many U.S. consumers enrolled in a service to monitor their credit data from TransUnion between 2018 and 2023?

More than 100 million U.S. consumers enrolled in a service to monitor their credit data from TransUnion between 2018 and 2023.

What were the motivations of U.S. consumers for monitoring their credit?

The motivations of U.S. consumers for monitoring their credit included opening new credit accounts (55%), managing debt levels (30%), and improving credit scores (15%).

What are the distinct segments of credit monitoring consumers identified in the study?

The study identified three distinct segments of credit monitoring consumers: Credit Seekers, Credit Managers, and Credit Improvers.

What benefits did Credit Seekers experience from monitoring their credit?

Credit Seekers experienced benefits such as opening 1.16x more credit accounts and higher origination rates for any credit product compared to those who do not monitor their credit.

What benefits did Credit Managers experience from monitoring their credit?

Credit Managers experienced benefits such as paying down debt and detecting fraud, with an average balance decrease of 11% within a year after starting monitoring.

What benefits did Credit Improvers experience from monitoring their credit?

Credit Improvers experienced benefits such as improving credit scores by an average of 28 points one year after starting monitoring.

Why did over one-third of U.S. consumers initially sign up for credit monitoring services?

Over one-third of U.S. consumers initially signed up for credit monitoring services because it was free.