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Consumer Credit Snapshot Shows Fewer Accounts In Financial Hardship Since Last Year

Katie Jensen
Jun 23, 2021

In May of 2020, 7.48% of financial hardship accounts represented mortgage delinquencies. A year later, only 4.07% represented mortgage delinquencies.

The May 2021 Consumer Credit Snapshot shows that accounts in “financial hardship” status dropped significantly compared to one year ago. The snapshot examines the status of financial hardship programs entered into by consumers for credit products, including auto loans, credit cards, and mortgages. 

In May of 2020, 7.48% of financial hardship accounts represented mortgage delinquencies; a year later, only 4.07% represented mortgage delinquencies. Still, mortgages make up the largest percentage of financial hardship accounts. 

The pandemic put a lot of families and working people in financial hardship, either by preventing them from working or curbing their income. The total amount of accounts in financial hardship status showed a considerable increase from March 2020 to May 2020, the early months of the pandemic. However, the May 2021 Consumer Credit Snapshot shows that the amount of these accounts dramatically decreased since last year. 

TransUnion’s research found that 70% of non-prime consumers and 80% of prime and above consumers made payments on hardship accounts while they were enrolled in such programs. Additionally, more than 40% of accounts in these programs exited within the first three months of entering. (Risk ranges for non-prime= 300-660; prime= 661-720; prime and above= 661-850.)

“Traditionally, enrollment in a financial hardship program signified heightened consumer risk,” said Jason Laky, executive vice president of financial services at TransUnion. “In the era of COVID-19, however, the consumer makeup of those accessing hardship programs has been much more diverse in terms of credit profiles. As things stabilize, we’ve found that consumers who exhibited key credit behaviors within the first three months of accessing an accommodation program performed well over the long-term.”

Those who exited on all of their hardship accounts by month three were at a lower risk than those who were enrolled in the program longer. They were also less likely to experience continued struggles and leverage financial accommodations again. 

Roughly 80% of these “early exiters” stayed out of hardship programs nine months later. Prime and above hardship consumers did exceptionally well with significantly lower delinquency rates if they exited the hardship program early. In comparison to non-prime consumers, they fared much better.

“The consumers who enrolled in hardship programs and exited early or continued to make payments on accounts overwhelmingly used the programs for their intended purpose. Not only were these consumers much less likely to go delinquent, but they were also able to get a leg up during a difficult situation,” said Matt Komos, vice president of research and consulting at TransUnion.“Lenders, banks and various financial institutions across the financial services landscape extended accommodations to consumers to help them withstand the challenges brought on by the pandemic.”

For more information about the study, register for the Credit Behavior Shifts of Consumers in Hardship Programs Webinar. Additional resources can be found at transunion.com/covid-19

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