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What to consider before applying for new credit as interest rates rise

What to consider before applying for new credit as interest rates rise


Many US consumers are just getting started on their credit journey, according to a new study by TransUnion. The credit bureau’s recent survey Empowering Credit Inclusion: A Deeper Perspective on New-to-Credit Consumers shows that in the United States, 5.8 million consumers opened their first credit product and became new-to-credit (NTC) during 2021. And another 3 million became NTC through the first half of 2022.

While 46% of US consumers cited having a convenient means of spending as a top reason for opening their first traditional credit product, access to credit products goes beyond covering the occasional expense. 

“A credit card is a unique product,” says Charlie Wise, co-author of the study and head of global research at TransUnion. “It offers lots of benefits, but the two primary ones are a means of transacting and the second is a means of borrowing.” 

What is a “new-to-credit” consumer and what kinds of credit products are they using? 

New-to-credit consumers are consumers who are just entering the credit market for the first time. According to the study, Gen Z made up the largest part of this NTC group (59%), followed by Millennials (21%), Gen X (12%), and Baby Boomers (7%). 

For US consumers, the most common first product across the board was a credit card, and the primary reason for opening an account: new expenses cropping up. The second and third most popular first products were auto loans and private label cards. 

Some consumers may opt to use their credit card for various transactions they might incur throughout their day-to-day spending, but others use it as a starting point for building a lengthy and positive credit history that future lenders will approve of. 

These products may be easy to gain access to, but the spending power that these products afford new consumers tends to be on the lower end. 

“If you have no track record, it’s very unlikely the card issuer is gonna give you a $10,000 line,” says Wise. “In most cases you’re gonna get $500–$1,000. As an unsecured line, they’re gonna give you a relatively short leash on which to dispense until you prove your track record.”

Why access to credit is crucial 

Many reported that other credit products, particularly mortgages, were considered inaccessible. Financing larger financial milestones like the purchase of a first home is still touted as a key driver in building long-term wealth. Without access to…

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