Subprime borrowers that saw their credit scores boosted by pandemic-era stimulus savings are reverting to bad payment behaviors, a recent report said.

A combination of federal government pandemic relief, unemployment benefits, and lower credit utilization during the COVID-19 lockdowns helped Americans build roughly $2.3 trillion in savings. The savings and pandemic-era forbearance programs, like the pause on federal student loan payments, led to lower delinquencies and helped consumers stay current and build credit, according to the TransUnion report.

For some previously subprime-scored borrowers, their newly boosted credit paints an inaccurate picture of their ability or willingness to pay now that government stimulus programs have ended and inflation has eroded savings.

Many of these consumers, who migrated to higher score categories, are missing payments at a pace in line with their older credit rating, the TransUnion report said. In some cases, the delinquency rate of these borrowers was more in line with the behavior of consumers who scored 25 points lower before the pandemic.

“Credit scores continue to perform extremely well at their intended role of rank ordering borrower risk,” TransUnion Vice President and Head of U.S. Research and Consulting Michele Raneri said. “That said, the temporary benefits brought on by pandemic-era government relief programs, and resulting consumer credit behaviors during that time, led to a rise in scores for many consumers, particularly those who previously had lower scores due to delinquent accounts and/or high credit utilization.

“Lenders would be well-advised to take a more holistic look at score migrators using data-driven insights into additional trended credit behaviors to better determine which ones are likely to remain in their elevated positions as well as those who may perform more in line with their prior score levels,” Raneri continued.

If you are struggling to pay off debt, you could consider using a personal loan to consolidate your payments at a lower interest rate, saving you money each month. You can visit Credible to find your personalized interest rate without affecting your credit score.

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Subprime borrowers that got a boost to their credit benefited from having greater access to lending products, according to TransUnion.

“Against this backdrop of higher credit scores, consumer demand for credit rebounded starting in mid-2021, as many government assistance programs ended and inflation began to rise,” the report said. “Demand was especially strong for credit cards and personal loans, products that provide immediate liquidity to consumers. At the same time, lenders’ willingness to provide such credit products increased.”

Credit card balances reached $917 billion in the first quarter of 2023, according to a separate TransUnion report. That’s an increase of almost 20% over last year. Moreover, the average balance per consumer grew 14.4% year-over-year to $5,733. 

Balances for unsecured personal loans rose 26.3% year-over-year in the first quarter of 2023 to register a new high of $225 billion. The average loan amount per borrower rose to $11,281 from $9.896 the year before.

If you are interested in taking out a personal loan, you could consider using an online marketplace to compare multiple options at once. You can visit Credible to find your personalized interest rate without affecting your credit score.

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Consumers who benefited from a boost to their credit scores can help maintain them by following these common-sense approaches, according to TransUnion.

One way to ensure payments are on time is to set them up automatically. Alternatively, electronic reminders are another way to make sure you won’t miss a payment.

Credit scoring models consider how close you are to your credit maximum. Try to keep your balances low compared to your total credit limit. Keep your use of credit at no more than 30% of your total credit limit. And paying off the balance each month helps get you the best scores.

Errors in your report can cost you points. So monitoring for discrepancies can help keep your credit healthy. If you spot any, make sure to dispute them.

“If you are a consumer who finds your credit score to be higher than it has been in the past, you should feel good about the work you’ve put in to get it there,” Ed Margaret Poe, TransUnion’s head of consumer credit, said. “But it’s important, too, to stay vigilant.”

If you are looking for ways to reduce your monthly expenses, paying down debt could be a good place to start. A personal loan could help you consolidate your monthly payments and pay down debt at a lower interest rate. Contact Credible to speak to a loan expert to see if this is the right option.

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