Am I Alone? The Number of People with Poor Credit in America
If you feel like you’re part of a small minority of Americans who have poor credit, it might help to know that you’re not alone—not by a long shot.
Financial instability is difficult to live with, especially in the United States, where those who are struggling often have limited options.
It’s especially difficult when we live in a society that seems to run on spending money. Even just seeing your friends for a few drinks can have you spending thirty dollars in one go. Other people might not understand the hoops you have to jump through when you have poor credit and are behind on the bills. As a result, financial instability can feel really isolating, as well as difficult.
If you find yourself wondering if you’re an outlier, know that you’re not alone.
What’s considered a “poor” credit score?
Credit scores can range from 300 to 850. Here’s how to tell what scores are considered good and bad according to FICO:
|FICO Score Range||Rating of Score|
A fifth of Americans have low credit scores.
According to Experian, 19.1 percent of Americans had a credit score below 600, and an additional 9.6 percent had a credit score below 650. That means about a fifth of Americans have “subprime” or “poor” credit scores, and about a third have credit scores less than “good”.
People under the age of 30 are most affected—their average score is 659 while the average score of people over 60 is 747.
Why do so many Americans have poor credit?
It makes sense that those under thirty are most affected by poor credit. The Great Recession hit in December 2007. People who are thirty now were just getting out of high school and those who went to college were graduating when the economy was still feeling the effects of the recession. Some families are still feeling the effects of the Great Recession today—resulting in credit troubles.
Another factor of poor credit could be poor financial literacy. The United States scored below average in financial literacy among 15-year-olds. Considering the financial system is so confusing that many people hire financial planners just to understand it, that’s not surprising. The credit system is counterintuitive and tricky at times and even the most responsible people can end up with poor credit due to making the wrong guess about financial decisions.
The sheer number of people with debt in America could also help explain poor credit scores. Debt isn’t a bad thing, in and of itself, but even one late payment can quickly ding your credit score. That means if you have a lot of debt, and your income is limited, all it takes is one financial emergency (say, an emergency car repair) to miss a few payments and start approaching the “poor” zone in your credit score.
Debt isn’t necessarily an indicator you’re irresponsible, either. Two of the most common types of debt are college debt and medical debt:
- 72 million Americans have medical bill problems or are paying off medical debt (41 percent of working age people)
- 44.7 million people have student loan debt (and over 11 percent of loans are delinquent or in default)
If you’re looking to become more financially literate, check out the free, standards-aligned personal finance classes that we offer through OppU.
Tips for building credit.
The good news is, there are options for people with poor credit. There are plenty of ways to build credit even if there are many credit lines closed to you.
- If you need a loan, opt for loans with soft credit checks. There are many loan options which require hard credit checks, which put a ding in your credit score. Installment loan options like Opploans conduct only soft credit checks in order to reduce the impact on your credit score. And if the lender reports your payment information to the credit bureaus—as OppLoans does—then all the better, as on-time payments can help you build a better credit history.
- Be sure to avoid predatory payday loans, title loans, or cash advances. They have higher interest rates—averaging 300 to 400 percent annually in many cases—and can easily make your credit situation even worse if something goes wrong or trap you in a cycle of debt.
- Put together a plan for making payments on time and be patient. The truth is, time and consistency is the best cure for low credit scores. Some people will advise you to open new accounts to get it up quickly, but that could hurt you in the long run.
- Focus on paying down debt. Pay more than you have to and make payments multiple times a month. Since credit scores are only updated once a month, making payments twice will ensure that your reduced debt is reflected in your credit report as quickly as possible. For a long-term debt repayment strategy, look into the Debt Snowball and Debt Avalanche methods.
- Don’t max out your credit card even if you can pay it off. It looks bad on your report to have a lot of your credit lines used up. In fact, one way you can help yourself out in this area is raising credit limits because credit bureaus closely monitor your credit utilization ratio.
It can be hard to struggle with low credit and work towards specific financial goals, especially if everyone else around you seem to be spending what they want. But chances are you aren’t the only one. One in five people you know has a poor credit score too.
Being honest with your loved ones about your goals and asking them to join you can help make it a little easier, along with following tips for getting your credit score back up. To learn more about improving your credit, check out these other posts and articles from OppLoans:
- How to Raise Your Credit Score by 100 Points
- Will Closing a Credit Card Affect Your Credit Score?
- How Long Does Bad Credit Last?
- Have Bad Credit? Here Are Two Things You Should Do