As Gen Z Comes of Age, Credit Market Activity Shows Significant Growth

Q2 2019 TransUnion Industry Insights Report explores latest consumer credit trends

CHICAGO, Aug. 14, 2019 (GLOBE NEWSWIRE) -- Gen Z, those individuals born in 1995 or after, increasingly took part in the consumer credit market during the first half of 2019. The newly released Q2 2019 Industry Insights Report from TransUnion (NYSE: TRU) found that growth is coming from the entire Gen Z demographic who are 18 years or older – not just those who became credit eligible for the first time. 

Approximately 14 million Gen Z consumers (44% of this group) were carrying a balance as of Q2 2019, up from 11 million in Q2 2018, according to the report. The number of Gen Z consumers who were credit eligible (18 years or older) increased by 4.5 million in the last year, rising to 31.5 million in Q2 2019. Over the next three years, it is anticipated that another 13 million Gen Z consumers will become credit eligible.

Gen Z Consumers Carrying a Balance Rising at High Rates

Credit ProductQ2 2019Q2 2018YOY Growth %
Credit Card7,746,0005,483,00041%
Personal Loan746,000534,00045%

“Both the newest and oldest members of the credit-eligible Gen Z generation are beginning to enter the credit market for the very first time,” said Matt Komos, vice president of research and consulting at TransUnion. “The rapid growth in Gen Z credit activity is occurring despite many of these individuals having grown up during the Great Recession. Though the recession itself lasted less than two years, its impact was felt for several years afterward. As we see more members of this group come of age, we naturally expect continued growth in credit activity by Gen Z, which we will monitor closely to compare to the behaviors of previous generations.”

Credit cards are the most popular product among Gen Z consumers, with 55% carrying a balance—though they still only constitute 5% of the U.S. population carrying card debt. Mortgages had the largest year-over-year growth rate spike with Gen Z consumers (112%), but from a low base. Mortgages are still the credit product Gen Z consumers are least likely to have, with only 0.5% of mortgages held by members of this generation.

The Percentage of Gen Z Consumers Carrying a Credit Balance is Growing (Data as of Q2 2019)

Credit ProductGen Z
(carrying a balance)
All Generations
(carrying a balance)
Gen Z
Credit Card7,746,000148,141,0005.2%
Personal Loan746,00019,556,0003.8%

“As Gen Z begins to build their financial resume, it’s important that they develop healthy credit habits so they can shape their financial future,” said Amy Thomann, head of consumer credit education at TransUnion. “We encourage Gen Z, and every generation, to seek out credit education tools that will help them take control of their path toward better credit health.”

TransUnion’s Q2 2019 Industry Insights Report features insights on consumer credit trends around personal loans, auto loans, credit cards and mortgage loans. For more information on these trends, please register for this quarter’s webinar.

Credit Card Market Continues to Show Signs of Growth

Q2 2019 IIR Credit Card Summary
The number of consumers carrying a card balance peaked at 148 million, with 7.7 million belonging to Gen Z, more than any other credit product. Total credit lines reached a high of $3.83 trillion in Q2 2019, a 10.5% increase from Q2 2018 and the fastest year-over-year rate of growth in the post-recession era. Though double digit increases were seen across the majority of risk tiers, it was highest in the mid-tiers, with near prime seeing 18.2% growth year–over-year and prime rising by 16.8%. These tiers drove total balance growth to 5.3% year-over-year in Q2 2019, the 25th straight quarter of such growth, with average consumer balances reaching $5,645. Though the consumer serious delinquency rate (90+ Days Past Due, or DPD) rose to 1.71%, delinquencies remain well below the 4% mark observed around the time of the Great Recession.

Instant Analysis
“This past quarter we saw delinquencies reach their highest level since 2010, but overall performance in the credit card market remains at a healthy level. Across all risk tiers, credit cards showed year-over-year origination growth, led by prime plus with 9.4% and super prime with 9.7%. In contrast, on the private label side we observed continued deterioration in originations, a trend that began in early 2017. This has been driven mostly by private label issuers seeking quality over quantity.”

- Paul Siegfried, senior vice president and credit card business leader at TransUnion

Q2 2019 Credit Card Trends

 Credit Card Lending MetricQ2 2019Q2 2018Q2 2017Q2 2016
 Number of Credit Cards437.1 million420.0 million409.8 million391.0 million
Borrower-Level Delinquency Rate (90+ DPD)1.71%1.53%1.46%1.29%
Average Debt Per Borrower$5,645$5,543$5,422$5,247
Prior Quarter Originations*15.3 million14.5 million15.0 million15.3 million
Average New Account Credit Lines*$5,773$5,649$5,817$5,466

*Note: Originations are viewed one quarter in arrears to account for reporting lag.

Delinquency Rates Hit Another Low, But Home Affordability Impacting Overall Mortgage Market

Q2 2019 IIR Mortgage Loan Summary
Serious delinquency rates for mortgage loans (60+ DPD) continued to decline, concluding the first half of 2019 at 1.37%. While performance has stayed strong, originations have remained conservative with 1.4 million new mortgage loans issued in Q1 2019. This is low compared to the Q1 origination numbers over the past four years. Affordability continues to be a challenge for consumers looking to enter the housing market, leading to a year-over-year origination decrease of 8.2%. While most risk tiers saw negative growth, subprime was the only risk tier to experience an increase this quarter (+0.8%). From a generational perspective, Gen Z consumers accounted for 2% of total originations. Gen Z may soon account for a larger share of mortgage loan growth, however, as the median age of home buyers is 28 and the oldest individuals in this generation are currently 24.

Instant Analysis
“The housing market can have high barriers to entry for first-time home buyers, as low inventory and rising home prices continue to make affordability an issue. However, with interest rates dropping in Q2, we expect originations to grow through the end of the year, largely driven by refinance volume. Overall the market is in a healthy position, with consumer level delinquencies reaching a historic low this past quarter.”

- Joe Mellman, senior vice president and mortgage business leader at TransUnion

Q2 2019 Mortgage Loan Trends

 Mortgage Lending MetricQ2 2019Q2 2018Q2 2017Q2 2016
 Number of Mortgage Loans53.3 million53.0 million53.0 million52.7 million
Borrower-Level Delinquency Rate (60+ DPD)1.37%1.67%1.92%2.30%
Average Debt Per Borrower$209,402$203,887$198,045$192,749
Prior Quarter Originations*1.4 million1.5 million1.5 million1.5 million
Prior Quarter Average Balance of New Mortgage Loans*$234,696$228,162$219,743$223,262

*Note: Originations are viewed one quarter in arrears to account for reporting lag.

Auto Originations Slow, Yet Performance Remains Strong

Q2 2019 IIR Auto Loan Summary
The total number of auto loans rose by 1.8 million in the last year, though year-over-year auto origination growth turned negative for the first time in five quarters. Despite overall declines in originations, growth occurred predominately in a straddle pattern and was focused in the super prime (+1.0%) and subprime risk tiers (+2.1%). Serious delinquency rates (60+ DPD) stood at 1.23% in Q2 2019, just one basis point higher than what was observed in Q2 2018 and the same level as Q2 2017. As Gen Z grows older, 1.3 million consumers with an auto balance were added to this category in Q2 2019, a higher volume of new participants than Millennials and Gen X combined.

Instant Analysis
“Auto affordability continues to pose a challenge for consumers, with factors such as increased new vehicle pricing and plateauing terms contributing toward more expensive monthly payments. The weakening demand has resulted in a slowdown of origination growth and an overall softening in the market. Industry forecasts indicate new vehicle sales will fall below 17 million this year for the first time since 2014. Despite this trend, performance remains strong with delinquencies keeping steady year-over-year.”

- Satyan Merchant, senior vice president and automotive business leader at TransUnion

Q2 2019 Auto Loan Trends

Auto Lending MetricQ2 2019Q2 2018Q2 2017Q2 2016
Number of Auto Loans82.7 million80.9 million77.4 million73.3 million
Borrower-Level Delinquency Rate (60+ DPD)1.23%1.22%1.23%1.11%
Average Debt Per Borrower$18,974$18,700$18,486$18,177
Prior Quarter Originations*6.7 million6.8 million6.7 million6.9 million
Average Balance of New Auto Loans*$21,418$20,901$20,415$20,013

*Note: Originations are viewed one quarter in arrears to account for reporting lag.

Personal Loan Growth Shifts to Lower Risk Borrowers, Continues at a Slower Rate

Q2 2019 IIR Personal Loan Summary
Serious personal loan delinquency rates (60+ DPD) declined to 3.12% in Q2 2019, down nine basis points from one year earlier, partially a result of originations shifting by over one percent to above-prime consumers. Given the higher loan sizes these lower-risk consumers demand, this shift also drove the average new account balance to a record high of $6,790. Total balances grew by 18.4% year-over-year to $148.4 billion in Q2 2019, with total balances now 54% higher than they were just three years ago. In Q1 2019, personal loan originations grew by 8.4% year-over-year – a much slower rate compared to the 24.5% growth experienced over the same quarter last year. The number of consumers with a personal loan reached 19.6 million in Q2 2019. While Gen Z represents only 3.8% of the 19.6 million consumers with personal loan balances, this generation is growing at the fastest pace at 45.5% year-over-year growth.

Instant Analysis
“The slower, but still significant, personal loan growth that we have seen over the past two quarters is a good indicator of what to expect in the market through the end of 2019. Growth continues to favor consumers in the lower risk tiers, which is reflected in lower delinquencies. As this market matures and the number of new lender entrants subsides, growth is not expected to return to levels over 25% as we saw in recent years. However, personal loan volumes across all risk tiers will continue to grow at a healthy level given consumer demand and the focus on this market by both traditional and FinTech lenders.”

- Liz Pagel, senior vice president and consumer lending business leader at TransUnion

Q2 2019 Unsecured Personal Loan Trends

Personal Loan MetricQ2 2019Q2 2018Q2 2017Q2 2016
Total Balances$148.4 billion$125 billion$107 billion$96 billion
Number of Unsecured Personal Loans21.6 million19.5 million17.3 million15.5 million
Number of Consumers with Unsecured Personal Loans19.6 million17.9 million16.1 million14.8 million
Borrower-Level Delinquency Rate (60+ DPD)3.12%3.21%3.02%3.30%
Average Debt Per Borrower$8,856$8,198$7,781$7,745
Prior Quarter Originations*3.76 million3.5 million2.8 million3.0 million
Average Balance of New Unsecured Personal Loans*$6,790$6,443$6,430$6,187

*Note: Originations are viewed one quarter in arrears to account for reporting lag.

For more information about TransUnion’s Q2 2019 Industry Insights Report, please register for this quarter’s webinar.

About TransUnion (NYSE: TRU)

Information is a powerful thing. At TransUnion, we realize that. We are dedicated to finding innovative ways information can be used to help individuals make better and smarter decisions. We help uncover unique stories, trends and insights behind each data point, using historical information as well as alternative data sources. This allows a variety of markets and businesses to better manage risk and consumers to better manage their credit, personal information and identity. Today, TransUnion has a global presence in more than 30 countries and a leading presence in several international markets across North America, Africa, Europe, Latin America and Asia. Through the power of information, TransUnion is working to build stronger economies and families and safer communities worldwide.

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An infographic accompanying this announcement is available at 

The Gen Z Credit Market is Taking Off