In an era of economic uncertainty and high interest rates, lenders are making fewer loans.
That means they make fewer calls to credit scoring agencies, reducing the fees those businesses can collect for their services.
TransUnion, one of the “Big Three” credit-tracking companies, failed to meet its third-quarter projections, cut its expectations for 2023, and withdrew its projections for 2024. Shareholders bailed out, dropping the company’s share price more than 23 percent.
Stock prices of Experian and Equifax, the other major credit-monitoring companies, also were hit.
TransUnion reported a 30-percent plunge in inquiries from mortgage lenders. Mortgage interest rates have spent the past three months well above 6 percent and now have surpassed 8 percent, freezing the housing market.
TransUnion also reported fewer inquiries related to the broader range of consumer lending, such as vehicle loans, which too have been quelled by high interest rates.
“When you look at the performance of mid-market and smaller banks, the pinch on new credit origination has been quite profound,” Christopher Cartwright, TransUnion CEO, said in a 26 October analysts briefing.
“It’s this macro retreat we’ve seen in lending that’s impacting business fundamentals,” he added.
“Demand for credit remains strong despite elevated costs,” he noted, which indicates that lenders are being more selective about who they loan money to.
“When banks sneeze, credit bureaus can catch a cold,” The Wall Street Journal commented.
TREND FORECAST: Across the economic spectrum, from real estate, to business loans, consumer credit etc., the higher interest rise and/or stay at their current levels, the greater the amount of business that will go out of business, the more individuals and corporations will default on their loans and the deeper the economy will crash.
Even though the U.S. Fed is expected to keep interest rates where they are tomorrow, as did the European Central Bank last week, as we had long forecast, it would take some 18 months for the rising interest rate to bring down economic growth… and that time is now.