Borrowers With Low Credit Scores To Access More Credit In 2022, Study

Borrowers with low credit scores could see increased access to loan facilities in 2022, according to a new forecast Study by TransUnion. TransUnion’s financial services explores future credit trends for auto, credit card, mortgage and personal loans and gives a sneak peek on what things might look like.

There is no doubt that borrowers with poor credit scores are increasingly getting their loan requests approved across different credit types, a trend that TransUnion says might continue in 2022.

“Continued expansion of lending, including to non-prime consumers, is expected to occur in 2022 with origination levels reaching or surpassing pre-pandemic levels,… For auto loans and personal loans, consumers who are generally higher risk are accounting for a growing share of origination volume, with the forecast providing insights that explain why such broader lending will benefit the overall consumer credit market.”

This suggests that higher-risk consumers with low credit scores are making up a growing share of personal and auto loan borrowers. According to TransUnion, this non-prime lending is expected to benefit the consumer credit  market as a whole.

Therefore, borrowers with poor credit history may still qualify for loans as lenders continue increasing their offerings. If you need personal loans for debt consolidation to lower your monthly payments, go through our list of best direct lenders for installment loans to get started.

Auto, credit card and personal loans to expand to borrowers with low credit scores

Personal loan originations are expected on increase in 2022, according to the TransUnion forecast. This creates seven straight quarterly increases even as 2021 ends in increased interest rates. This increase will serve both prime and non-prime borrowers, and those with good credit history and also those with poor credit scores.

TransUnion also projects that number of auto loans will rise to 28.9 million from the 28.3 million projected for 2021. Non-prime auto loan originations are expected to increase from 9.4 million in 2021 to 10 million in the new year and gain market share.

Credit cards are projected to see a slow down in originations in 2022, particularly for borrowers with low credit scores. Despite this, they will remain well above the origination levels recorded in 2019 and 2020.

Borrowers Looking For More Credit Option As Stimulus Programs Come To An End

As the Federal Stimulus program aimed at easing the severe impacts of the Covid-19 pandemic comes to an end, borrowers are expected to loos for more credit options such as payday loans.

“The consumer landscape is starting to more closely resemble the pre-pandemic era. With forbearance programs expiring and stimulus funds drying up, demand for credit is growing and consumers are reevaluating their credit needs – which is a sign of a humming and functioning economy. The year 2022 will mark a continued return to lending in the credit market, which will help fuel the continued resurgence in consumer spending.”

TransUnion’s study is based on various economic assumptions such as consumer prices, gross domestic product (GDP), home prices, unemployment rates and personal disposable income. Note that the forecasts may change if the economy undergoes unexpected shocks, such as if the Omicron Covid-19 variant disrupts economy recovery efforts, if home prices fall unexpectedly or inflation continues rising into the next year.

On the upside, improvements in the economy such as potential increase in disposable income and GDP may also affect the forecasts resulting from the TransUnion study.