Bad Credit Statistics 2022-2021
- 11% of U.S. Consumers Have the Lowest FICO Scores
- 25% of Low-Income Americans Don’t Know How to Improve Credit
- 18% of Adults Ages 18-24 Never Check their Credit Scores
- 39% of American’s Can’t Cover a $400 Emergency Expense
- 2.28% of Personal Loan Borrowers are Late on Payments by 60+ Days
- Non-Revolving Debt Hit an All-time High, Up 3.9%, in 2020
- 54% of Black Americans Report Having No Credit
- 57% of Americans Think Bad Credit is Better Than No Credit
Bad Credit Loan Statistics 2022-2021 – Facts and Trends
Bad Credit Scores
Bad credit is a major concern amongst Americans, but the lowest-possible FICO scores are surprisingly rare. Only 11% of U.S. consumers have the lowest FICO scores, which range from 300 to 578. The FICO credit rating system ranges from 300 to 850. This means that around 89% of Americans have at least a credit score of 579. Just remember that the consequences of bad credit aren’t only reserved for the lowest tier. Americans with scores under 600 may still have difficulty securing credit, while consumers with rates of 700 and above typically have access to the best rates.
Americans who have very low credit scores have many opportunities to raise their rates. However, around 25% of low-income Americans don’t know how to do this. Improving a bad credit score is important for Americans who want access to low interest rates and larger loans. Many attribute this lack of knowledge to missing education in basic finance. For those who need help, consolidating loans, paying bills on time, and reducing debt can help raise credit scores.
Checking your credit score is an important piece of financial hygiene. Surprisingly, a large portion of the 18 to 24 age category never check their rankings. 18% of adults ages 18 to 24 say they never check their credit score. This could happen for several reasons. Young adults have fewer opportunities and reasons to secure lines of credit. This means there are fewer reasons for them to check their scores. Additionally, credit scores mature over time. Young adults in the 18 to 24 age category are likely to have only a couple of years of credit under their belts, so change is less likely during this period.
Bad Credit Subprime and the Worst Credit Scores
A recent Federal Reserve report found that around 39% of Americans don’t have enough cash on-hand to cover an emergency expense of $400. In the same report, the agency found that around 18% of Americans – close to 1 in 5 – had a “fair” credit score. This means that many Americans are at extreme financial risk. When put in a dire situation, they may not have the funds or credit necessary to access emergency support.
While many Americans may miss the occasional payment, dramatic delinquency is rare. According to a TransUnion report, only around 2.28% of personal loan borrowers are more than 60 days late on their payments. This low number is likely a result of the various “hardship policies” lenders install to help borrows avoid defaulting on bad credit loans. Additionally, lenders do not typically report loans in hardship – or loans where the borrower has utilized a hardship policy – to credit bureaus. Defaulting on a personal loan can cause irreparable damage to a person’s credit score.
The coronavirus pandemic caused interesting shifts in the ways Americans distribute their debt. In 2020, non-revolving debt hit an all-time high of $3.20 trillion, marking a 2.9% increase from 2019. Non-revolving debt, also known as installment debt, includes things like student and automotive loans. By contrast, revolving debt decreased by $115.1 billion, or 10.55%, in 2020. Examples of revolving debt include credit cards. These changes illustrate a consumer interest in the low interest rates that typically accompany non-revolving debt options. Many Americans have taken advantage of low interest rates to refinance home mortgages, which could account for the dramatic rise in non-revolving debt.
According to a recent survey by Credit Sesame, around 54% of Black Americans say they have no credit or a poor-to-fair credit score. Any score below 640 is considered to be low. The same report found that around 41% of Hispanic Americans also fall into this category. By contrast, only around 37% of White Americans reported falling into this category, as did only 18% of Asian Americans. The General Manager of Credit Sesame, Jay Moon, attributes this stratification to variables like high rates of student loan debt and a lack of payment history amongst non-white Americans. Many Black and Hispanic Americans report having never received a financial education to help them address these issues.
According to a YouGov/ScoreSense Study, 57% of Americans think that having bad credit is better than having no credit at all. In most cases, this is an incorrect assumption. According to Forbes Advisor, it is better to have no credit than to have bad credit. While unestablished or negative credit will impact a person’s ability to borrow, bad credit illustrates a track record of poor borrowing practices. In other words, a person with no credit has not had the opportunity to prove themselves to be a good borrower. A person with bad credit has had, and lost, that opportunity. However, having too many or too few revolving lines of credit can affect a credit score. Having four credit cards, which is seen as too many, will have a similar effect on credit as having zero credit cards, which is seen as too few.