CHICAGO — TransUnion said it has uncovered the link between mortgages and auto financing. In a study released last week, the credit reporting agency found that consumers applying for a new mortgage are, on average, two to three times more likely to open a new auto loan or credit card account over the next 12 months. In some cases, many of these consumers open these accounts as soon as one month after their existing mortgage payoff.
TransUnion’s study centered on mortgage applicants in the prime or better risk tiers with an existing mortgage and who are likely moving or refinancing. It found that, compared to the overall population, prime or better mortgage applicants are, on average, 50% as likely to open a new credit card over the next 12 months following a mortgage inquiry. These same consumers can be up to three times as likely to open a new auto loan in that same 12-month period.
“Our research found that consumers either purchasing new homes or refinancing their mortgage loans are far more likely to open a new auto loan or credit card soon after this major life event, many within one month,” said Ezra Becker, the study's coauthor and senior vice president of research and consulting in the firm’s financial services business unit. “This finding is important, both because it quantitatively confirms the conventional wisdom and illustrates how necessary it is to look across products to get the full picture of consumer credit behavior.”
The study also found that average daily credit card originations for consumers who moved into new homes were 54% higher 30 days after paying off a mortgage compared to 30 days prior. Average daily auto originations were 84% higher in that same timeframe. Nearly identical credit card and auto origination trends were observed for consumers who refinanced an existing mortgage.
“Clearly, consumers who are planning to move or refinance their mortgage wait until after that event to seek new credit, but once that new mortgage event occurs, their demand far outstrips the overall population,” Becker said. “This information is particularly valuable for lenders who are seeking credit-active consumers with higher demand for new credit cards and auto loans; this population is much more likely to respond to new offers, making them an attractive segment that lenders can now identify.”