Report Reveals 60 Million People Struggle to Access Credit

Inside Subprime: October 29, 2019

By Grace Austin

Consumers’ access to credit may be in worse condition than previously estimated, according to the latest Federal Reserve report.

The New York Federal Reserve released September findings that show 60 million people don’t qualify for essential financial things like credit cards and loans without difficulty. The number of Americans who can’t easily obtain loans is nearly two times higher than was previously thought, according to Reuters analysis.

“Credit access is a lens on a community’s ability to build wealth and weather a financial storm,” said Kausar Hamdani, senior vice president at the New York Fed, in a press release.

The New York Fed has been tracking credit insecurity data for more than 10 years, including through the Great Recession when many Americans were struggling financially. The New York Fed maintains that the national credit index rating is still higher (a higher score is considered worse financially) than it was in 2007.

Some of the factors that the New York Fed looks at as “credit-limiting outcomes” are a low credit score, a struggling or delinquent payment history and being outside of the “formal credit economy.”

So what does a lack of access to credit mean for consumers?

It means less room to maneuver difficult financial situations, or less funds to invest in future business or academic opportunities. Those consumers may struggle to come up with quick money, and may turn to payday loans and title loans for quick cash instead.

The South and the Southwest had the highest concentration of people with credit access problems in 2018, with Mississippi and Louisiana having the highest percentage of the population living in counties considered “credit insecure.” A county in Alaska, Aleutians West Census Area, has the highest credit insecure population in the country. Meanwhile, Texas has the largest number of counties that are considered credit insecure, with 60 overall.

Some states, though, don’t even have “credit insecure” counties, including Hawaii, Maine and Wisconsin. New Hampshire, Minnesota, Vermont and New Jersey ranked as the least credit insecure of all the states.

“Many of those who struggle to access credit also tend to live in rural areas, earn lower incomes and have higher rates of unemployment,” according to Reuters’ analysis of the report.

African Americans and Latinos are also more likely to live in counties with lower credit access. Twenty-seven percent of the population in the counties with the top-tier credit access isn’t white, while 55% of the population in the counties with the worst credit are people of color.

The New York Fed’s report indicates that credit insecurity improvement has been slow. But the goal of publishing the report is clear: to show where financial gaps are and potentially influence public policy change.

Learn more about payday loans, scams, and cash advances by checking out our city and state financial guides, including Chicago, Illinois, Florida, Texas, and more.