Creditors and lenders are going to be a little more aggressive in their risk-taking in 2022, according to data provided by TransUnion, thanks to delinquency and charge-off rates that have remained stable through this year. Many lenders tightened their underwriting criteria during the pandemic and are now ready to start loosening those guidelines and originating more loans to borrowers with less-than-perfect credit, according to the company.
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TransUnion is predicting higher origination volumes for auto loans, credit cards, and personal loans in 2022. For auto loans and personal loans, the totals for 2022 will be the highest in recent years, while the total projected for credit cards will still be slightly below what was originated in 2019 and 2021. While the number of new credit cards issued might not be as robust, the balances on those cards will be. TransUnion is projecting that the total balances on credit cards will be $805.7 billion, the highest level since the start of the pandemic and 3% higher than the balance from the end of this year.
“During the height of the pandemic, many lenders pulled back and tightened underwriting to hedge risk in a period of great uncertainty,” said Charlie Wise, head of global research and consulting at TransUnion, in a statement. “Consumer performance, however, has continued to stay strong, which has restored lender confidence. The economy is normalizing and continues to expand, and those signs of renewed strength are encouraging lenders to not just focus on the least risky consumers, but to provide greater access to those persons that may be viewed as higher credit risks.”
As lenders loosen their underwriting guidelines and open the credit faucet to more borrowers, TransUnion is predicting that delinquency and default rates will start climbing during 2022, but will still be well below pre-pandemic levels.
