Consumer Credit Monitoring Surges As Americans Prioritize Financial Well-Being

More and more consumers today are becoming aware of their credit ratings. According to Charlie Wise, a senior vice president at TransUnion, over 100 million Americans signed up for one of the company's credit monitoring programs between 2018 and 2023. "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 among consumers of becoming victims of credit fraud," he says.

Since the onset of the COVID-19 pandemic in 2020, there has been a significant decrease in overall consumer debt levels. Lockdown measures curtailed spending on non-essential goods and services, while stimulus payments provided individuals with additional resources to pay down their existing debts. Additionally, some borrowers took advantage of forbearance programs for student loans and mortgages, further reducing their financial obligations.

However, as these temporary financial cushions depleted and inflationary pressures drove up prices, many individuals are once again resorting to taking out loans to meet their financial needs. Consequently, there has been a noticeable uptick in the number of credit offers being extended to consumers.

Wise notes a heightened interest among individuals in understanding and managing their credit ratings. The availability of online resources such as NerdWallet and Credit Karma, along with complimentary credit monitoring services offered by some banks, has facilitated greater consumer awareness and engagement with their credit profiles.

"These benefits are shown to 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," he adds.

Despite the increase in borrowing activity, most individuals maintain strong credit ratings. According to data from the Federal Reserve Bank of New York, total credit card balances rose to $1.13 trillion in the fourth quarter of 2023, yet the average FICO score remains above 700. FICO considers a score between 670 and 739 to be indicative of good creditworthiness.

Matthew Toles, a banking industry expert, emphasizes the significance of managing revolving debt, such as credit card balances, which has a considerable impact on credit scores.

"Key factors influencing credit scores include the utilization of available credit, payment history, and the length of one's credit history. While there are strategies to improve credit scores, meaningful improvements may take several months to materialize," he remarks.

Utilizing more than 30% of available credit, such as maintaining a balance of $8,000 on a credit card with a $10,000 limit, can adversely impact your credit score. Consistently making at least the minimum payment each month is also important to avoid negative repercussions. Furthermore, missing even a few payments can significantly lower your credit score.

Another factor to consider is the timing and frequency of credit card applications, as applying for multiple cards simultaneously can harm your credit score, regardless of whether you open new accounts. Individuals with limited or no credit history may worry about their eligibility for new credit; however, according to Toles, this concern may not always be warranted.

To improve your credit score, several strategies can be employed. One approach is obtaining a secured credit card, where you deposit funds into an account to establish a credit line. Alternatively, becoming an authorized user on a family member's account can leverage their positive payment history to benefit your credit report.

"It’s a clear indication that those consumers who are actively looking to improve their credit health may achieve better results if they monitor their credit and are able to plan their steps and track their progress," says Lindsey Downing, head of TransUnion’s Consumer Interactive business. 

Today, consumers have come to anticipate financial institutions providing complimentary credit monitoring services. This offering empowers individuals to enhance their credit profiles, effectively manage current credit accounts, and explore opportunities for obtaining new credit down the line.