Targeting New-to-Credit Consumers for Growth

Despite a recent dip in growth caused by the pandemic, Canada's new-to-credit (NTC) consumer segment is a sizeable market for lenders that can safely and sustainably expand mutually beneficial relationships with these consumers as they build up their credit profiles.

The NTC consumer profile

We analyzed NTC consumers who entered the Canadian credit market for the first time during 2019 and 2020, and compared their profile to consumers active in the credit market for at least the prior two years. We learned:

•  At origination, the majority of NTC consumers are unscorable or have lower credit scores
• They’re generally younger than the established credit-active population — with Millennials and Gen Z making up over 80%
• About 80% opt for a low-limit credit card as their first product
• Immigration and travel restrictions during the pandemic negatively affected NTC growth

Their credit journey

To learn more about what happens after they open their first trade, we followed the credit journey of around 900K NTC Canadian consumers. We learned these consumers offer a valuable growth proposition for card issuers because:

• Although they spend less than established consumers and carry lower balances, their line assignments increase at a faster rate, especially after the first year
• As they ramp up utilization, many (66%) improve credit scores quickly after their first year in the credit market

The NTC growth potential

We then evaluated additional products and subsequent trades and discovered:

• Although NTC Gen Zers originate more student loans, all generations prefer cards and personal loans as their following trades
• Delinquencies are higher within subprime but comparable to established consumers in near prime and prime segments
• Credit limits on the following cards remain lower, indicating an opportunity for enhanced line assignment strategies
• Lower rates of first-lender cross-selling, suggesting an opportunity to generate stronger loyalty

Strategy implications for lenders

Although Canadian lenders have tremendous opportunities within the NTC segment, our study indicates a need for enhanced lending strategies, especially around:

PANDEMIC IMPACT: The pandemic slowed NTC growth. Are you prepared for pent-up demand that may emerge in the post-pandemic world?

CREDIT DEMAND: Credit cards are the go-to product for NTC consumers. Are you leveraging trended credit data to optimize line assignments for risk and return?

LOYALTY: NTC consumers aren’t very loyal regarding follow-on product originations. Are you proactively predicting their credit needs?

PERFORMANCE: Credit performance is generally healthy comparable to established consumers. Are you leveraging friction-right channels and onboarding solutions to acquire NTC consumers?

TransUnion solutions and enhanced strategies provide a unique lens by which to assess/gauge NTC consumers throughout their credit lifecycle

To learn how TransUnion can help you leverage growth prospects across every segment of the credit market, contact your TransUnion representative.

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