The kids are all right in terms of credit risk

One key finding of the study was that NTC consumers – those early in their credit journey – generally perform as well or better than borrowers with established credit and similar risk scores. TransUnion researchers posited the finding as added assurance for lenders to expand credit to such consumers without incurring materially higher delinquencies.

Wise acknowledged he found the finding a bit surprising: “It was surprising because the conventional wisdom is that consumers who are younger, consumers who are less experienced with credit, might have more difficulty in managing credit,” he said. “Credit, quite frankly, is a muscle you build up over time around the importance of timely payments, budgeting, financial management, and all that stuff that you build up over time. New-to-credit consumers are, by and large, younger; they are, by definition, less experienced in managing credit. So we would have expected to see some stumbles coming out of the gate for those consumers when they’re first entering.”

Lenders, take note

He stressed the importance of the finding as it relates to lenders: “The more consumers who can participate in credit markets in a region, the greater the opportunities for broad economic inclusion. The data from our study demonstrate that new-to-credit consumers are often good risks who are hungry for credit and will show loyalty to those financial institutions that offer them their first credit accounts.”

The study suggests lenders might rethink their collective approach to expanding credit in light of the finding: “Many banks and lenders spend considerable time and money attracting new customers,” the study concluded. “However much of that effort is often directed at consumers who already have experience and demonstrated track records with credit. But there are significant lifetime loyalty benefits to being the organization that gives a consumer their first credit product.”

The paradigm in terms of focus could use some tweaking: “Developing a strategy to attract and build relationships with NTC consumers and help them along their credit journeys can create a base of loyal customers who will become increasingly profitable as their needs and financial capacities continue to grow.”