With the number of Canadian consumers enrolled to monitor their
credit with TransUnion® (NYSE: TRU) showing an 11x increase between
2018 and 2023, a new global study has found that the motivations
for consumer credit monitoring are diverse. In Canada, the largest
share of surveyed consumers (45%) monitor with the goal of better
managing their debt levels and preventing fraud activities, while
four in 10 (42%) do so in anticipation of opening a new credit
account, and 13% seek to improve their credit profile.
To better understand the distinct profiles, motivations and
future outcomes of credit monitoring consumers, TransUnion
conducted a global research study examining credit behaviours for
millions of consumers in both developed and developing markets –
Canada, Brazil, Chile, Colombia, Dominican Republic, Guatemala,
Hong Kong, India, Philippines, South Africa, the United Kingdom,
and the United States. 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 by consumers of becoming
victims of credit fraud,” said Nidhi Verma, co-author of the study
and head of international 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 help 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 Canada, 71% of surveyed consumers stated that it is important
to monitor their credit, with nearly one fifth (17%) saying it’s
extremely important. This finding demonstrated that consumer
awareness of credit monitoring is high and is a likely driver
behind the surge in monitoring activity in recent years.
TransUnion surveyed Canadian 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 consumers initially signed up for credit monitoring
services were that it was free (36%), to improve their credit score
(32%), and to monitor their report for accuracy (27%).
Additionally, after using monitoring services for some time,
Canadian consumers reported added benefits that credit monitoring
has enabled them to achieve: learn how to monitor and manage their
credit score (43%), gain visibility to changes on their credit
report (37%), detect fraud (30%), and pay down debt (21%).
The study further identified three distinct segments of credit
monitoring consumers based on their primary motivation for
monitoring their credit. These include Credit Seekers, Credit
Managers, and Credit Improvers.
Credit Seekers Benefit from Attaining New
Credit Almost half of the credit monitoring population
(42%) 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 who do not, credit monitoring
consumers open 1.22x 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 – saw similar higher levels of new credit
activity for the credit monitoring segment. NTC consumers who
monitor their credit display 1.19x higher origination rates for any
credit type than those with no history of monitoring their credit,
and for underserved credit monitors it is 1.21x. “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 Verma.
Percent of Consumers Originating a New
Credit Card within One Year of Starting Credit
Monitoring
|
|
|
|
Credit Monitoring Consumers |
Non-Monitoring Consumers* |
Overall |
58 |
% |
54 |
% |
New to credit1 |
72 |
% |
66 |
% |
Underserved2 |
63 |
% |
9 |
% |
Served3 |
54 |
% |
49 |
% |
* Non-monitoring consumers were analyzed over the same time 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 the highest share of
Canadian consumers (45%) monitor their credit with the intention of
keeping an eye on their overall balances and credit health. 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, 21% of all Canadian 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 Canadians taking the initiative to
ensure they are paying down or managing their debt levels,” added
Verma.
Another primary motivation reported by Credit Managers is
protecting against fraud. Nearly one third (32%) of Canadian
consumers reported that they continue to utilize credit monitoring
services over time to detect and protect against fraud. This
benefit is of increased importance to consumers considering the
continued rise in fraud activity that has been observed since the
onset of the COVID pandemic. Nearly half (49%) of Canadians said
that they were recently targeted by fraudulent activity during the
second quarter of 2023, with fraud attempts in telecommunications
having increased by 400% year-over-year (YoY) over those three
months.
Credit Improvers Benefit from Monitoring Scores and
Staying Current on ObligationsCredit Improvers, who make
up 13% of the Canadian 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 Canada generally
experienced credit score improvements of 32 points, on an average,
one year after they started monitoring their credit. The
improvement was at 37 points for NTC consumers – those borrowers
who have recently opened their first-ever credit account. In both
instances, the improvement in scores was better than a comparison
set of consumers who have no history of monitoring their
credit.
Median Score Improvement One Year After
Starting Credit Monitoring
|
Credit Monitoring Consumers |
Non-monitoring Consumers* |
Overall |
32 |
26 |
New to credit |
37 |
29 |
Underserved |
35 |
21 |
Served |
30 |
25 |
* Non-monitoring consumers were analyzed over the same time from
the date when credit monitoring consumers with similar credit
profiles began monitoring services
“While Credit Improvers are the smallest segment of credit
monitoring consumers in Canada, they also tend to see some
impactful benefits in terms of credit improvement,” said Matthew
Fabian, director of financial services research and consulting at
TransUnion in Canada. “It’s a clear indication that those consumers
who are actively looking to improve their credit scores 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
LendersTo 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 Canadian consumers (36%) said they initially
signed up for credit monitoring because it was free. Four in ten
(40%) said that they would continue to bank with a lender that
offered free credit monitoring, and nearly one quarter of these
customers (23%) stated they would prefer the lender providing free
credit monitoring services over other lenders when opening new
products. Nearly one fifth (17%) said they would prioritize
payments to that lender over other lenders’ payments.
“Consumers now expect financial institutions to offer free
credit monitoring services, as it provides them the tools 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 Fabian.
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. Learn more about how
TransUnion helps individuals protect against identity theft
here.
About TransUnion®
(NYSE: TRU)
TransUnion is a global information and insights
company with over 13,000 associates operating in more than 30
countries, including Canada, where we’re the credit bureau of
choice for most of Canada’s largest banks. We make trust possible
by ensuring each person is reliably represented in the marketplace.
We do this by providing 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.
For more information visit:
www.transunion.ca
____________________________
1 A new-to-credit consumer is one with no prior credit history
on their credit bureau file who opened their first-ever traditional
credit product such as a vehicle loan, credit card or other product
unique to their region.2 Underserved consumers are defined as any
person who has two or more years of credit experience, but no more
than 2 currently open accounts of one product type ever.3 Served
consumers are those who are credit-visible, active consumers who
have two or more years of credit history, currently have three or
more credit accounts open, or have had two or more different credit
product types currently or in the past.
Contact |
|
Hyunjoo
Kim |
|
|
TransUnion |
E-mail |
|
Hyunjoo.Kim@transunion.com |
Telephone |
|
+1 (289) 962-2376 |
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