Credit Monitoring South Africans Open More New Credit Accounts, and Cure Delinquencies at a Higher Level than Non-Monitoring Consumers

• 85% of South Africans say that it’s important to monitor their credit
• Over half (51%) of South Africans monitor their credit profile with the goal of improving their credit score
• Consumers that monitor their credit with the goal of opening new accounts are more likely to achieve that outcome

South Africans monitor their credit profiles and scores for a variety of reasons, with more than half of South Africans (51%) doing so with the goal of improving their credit score. Almost three in ten of South Africans (29%) monitor their credit report with the goal of paying down debt and preventing fraud activities, while 20% do so in anticipation of opening new credit accounts. These are some of the findings of a new TransUnion global study that set out to better understand the distinct profiles, motivations and outcomes of credit monitoring consumers.

TransUnion conducted a global research study examining credit behaviours for millions of consumers in both developed and developing markets – South Africa, Brazil, Canada, Chile, Colombia, the Dominican Republic, Guatemala, Hong Kong, India, Philippines, the United Kingdom, and the United States. To further identify how these benefits advance credit education and enable financial inclusion, the study used depersonalised credit data to analyse 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 was fuelled by the impact of the pandemic on consumer finances, the current high-interest rate, high inflation environment, and consumers’ heightened awareness of taking steps to avoid 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 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 South Africa, 85% of surveyed consumers stated that it is at least moderately important to monitor their credit, with more than a third (36%) 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 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 South African consumers initially signed up for credit monitoring services were that they were trying to improve their credit score (47%), to learn about credit offers they may qualify for (33%), and to monitor their report for accuracy (31%).

Additionally, after using monitoring services for some time, consumers reported realising added benefits. These include that credit monitoring has allowed them to learn how to monitor and manage their credit score (55%), make regular payments (42%), and pay down debt (34%).

The study further identified three distinct segments of credit monitoring consumers based on their primary motivation for monitoring their credit. These include Credit Improvers, Credit Seekers and Credit Managers.

Credit Improvers benefit from improving scores and staying current on obligations

Credit Improvers, who make up 51% of the South African 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 South Africa generally experienced larger credit score improvements one year after they started monitoring their credit than consumers who have no history of credit monitoring.

In addition to improving scores, credit monitoring subprime consumers are looking to improve their delinquencies, by better understanding their obligations and how their payments impact their credit scores. With that in mind, TransUnion found that those who monitor credit cured their delinquent credit card accounts – meaning they improved their account status from past due to current – at a three percentage points higher rate than those who do not monitor credit. This improvement in cure rates was observed amongst consumers who were delinquent before signing up for self-credit monitoring and subsequently became current on their overdue payments within the first three, six, or 12 months of monitoring credit.

Consumer-level Delinquency Cure Rates One Year After Starting Credit Monitoring

* Non-monitoring consumers were analysed over the same time period from the date when credit monitoring consumers with similar credit profiles began monitoring services  

“The volume of South African consumers enrolled in credit monitoring tools for the first time with TransUnion (NYSE: TRU) has been growing steadily for years,” said Lee Naik, CEO TransUnion Africa. “Credit Improvers are the largest segment of credit monitoring consumers in South Africa and tend to see some of the most impactful benefits in terms of credit profile improvement. It’s a clear indication that those consumers who are actively looking to improve their credit standing may achieve better results if they monitor their credit and are able to plan their financial obligations and track their progress.”

Credit Seekers benefit from attaining new credit

One fifth of the South African credit monitoring population (20%) do 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 1.11x more credit accounts, such as credit cards and vehicle finance loans, over the following year.

New-to-Credit (NTC) consumers – those early in their credit journeys – saw similar higher activity for the credit monitoring segment. NTC consumers who monitor their credit display 1.22x higher origination rates (opening new credit products of any type) compared to those with no history of monitoring their credit. “For New-to-Credit 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 Naik.

Percent of Consumers Originating a New Bank Personal Loan within One Year of Starting Credit Monitoring

* Non-monitoring consumers were analysed over the same time period from the date when credit monitoring consumers with similar credit profiles began monitoring services  

Credit Managers benefit from paying down debt and detecting fraud

The study found that many South African consumers (29%) 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 and/or monitoring for fraud. When surveyed, 34% of all South African credit monitoring consumers said monitoring their credit had helped them pay down debt.

“Even though we are in a high-interest rate environment with consumers leveraging credit to make everyday purchases, it’s reassuring to see so many South Africans taking the initiative to ensure they are paying down or managing their debt levels, and that credit monitoring plays an important role in achieving that goal,” added Naik.

Another primary motivation reported by Credit Managers is protecting themselves against fraud. More than one third (35%) of South African consumers reported that they continue to use 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-19 pandemic.

Free credit monitoring benefits consumers and lenders

To help more consumers easily access their credit scores, many financial institutions offer free credit monitoring tools. This easy access not only helps consumers but enables lenders to build stronger relationships with their customers.

Nearly four in ten (38%) consumers said that they would prefer a lender that offered free credit monitoring, and 48% said that they would continue to bank with this lender. Over one quarter (27%) said they would prioritise 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 Naik.

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 and families protect against identity theft here.

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Note to editors:

For the purposes of this study, TransUnion defined a consumer as self-monitoring their credit if they checked their credit report at least once during the study timeframe. Our study measures South African consumers who started monitoring their credit for the first time between June 2021 and December 2022 as our primary study population.

^[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.