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Credit Health during the COVID-19 Pandemic

How is your community faring on credit health measures?

The COVID-19 pandemic disrupted people’s lives across the United States. To understand how the pandemic and the economic response influenced credit health—people’s credit scores, debt delinquencies, and borrowing—we examined credit bureau data from February 2020 to August 2021.

Key measures of credit health have improved since February 2020, but many families and communities still face financial challenges. Racial disparities in credit health reflect historical inequities that reduced wealth and limited economic choices for communities of color.

The trends since February 2020 indicate that policymakers’ and private-sector partners’ actions to help families weather the financial impacts of the pandemic have made a difference. However, credit indicators in August 2021 show that many families still face barriers to financial health. Additional supports are necessary to sustain improvements and help struggling families.

Median credit scores reveal persistent racial disparities

  • All Communities
  • Black
  • Hispanic
  • Native American
  • White

Source: Tabulations of Urban Institute credit bureau data.
Notes: Credit scores are Vantage scores that range from 300 to 850. The communities listed in the key refer to zip codes where more than 60 percent of residents are Native American or in the respective racial or ethnic group.

Credit plays a vital role in families’ abilities to weather financial disruption and access assets and education, but it does not tell the full story of financial health. Credit data cannot capture the experiences of about 1 in 10 US adults who do not have a credit file, a disproportionate amount of whom are people of color. And although credit health appears to have improved for all groups during the pandemic, racial gaps have not narrowed.

Majority-Black communities and majority–Native American communities have the lowest median credit scores and the highest debt-in-collection rates, subprime credit score rates, and use of high-cost payday and other nonbank loans. These racial disparities reflect historical inequities that reduced wealth and limited economic choices for communities of color.

Our data dashboard provides a timeline of these and other measures to show how the pandemic has affected residents’ credit health at the county, state, and national levels. How are the residents of your state or county faring?

February 2020 April 2020 June 2020 August 2020 October 2020 December 2020 February 2021 August 2021

Share with a subprime credit score AUGUST 2021

  • 20.3% United States

    Source: Tabulations of Urban Institute credit bureau data.
    Notes: NA = not available. Data for this location are not available because the sample size is too small. Detailed race data are not available for communities that are too small. See the “About the Data” section for an explanation of how we define communities of color and majority-white, Black, Hispanic, and Native American communities.

    Share with a subprime credit score in the United States

    All
    Native American communities
    Black communities
    Hispanic communities
    White communities
    February
    AllNative American
    Black communitiesWhite communities
    Hispanic communities
    United States
    State
    County
    County communities of color
    County majority white counties
    August
    United States County communities of color
    State County majority white counties
    County

    Source: Tabulations of Urban Institute credit bureau data.
    Notes: NA = not available. Detailed race data are not available for communities that are too small.

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    Key Findings

    How August 2021 credit health data compare with February 2020

    Several credit health measures improved during the pandemic, but many families and communities still face financial challenges.

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    • Credit scores improved, and the typical score is now prime for residents living in majority-Black and majority–Native American communities. The median credit score for all adults with a credit record was 709 in August 2021, compared with a median credit score of 693 in February 2020. About 1 in 5 (20 percent) adults with a credit record had a subprime credit score in August 2021. This improved from February 2020, when 25 percent had a subprime credit score. Notably, the median credit score for residents living in majority-Black and majority–Native American communities improved nearly 30 points since the beginning of the pandemic and brought the median credit score into the prime range. More residents may benefit from lower borrowing costs and have more options in the event that they need credit.
    • A smaller share of residents carried past-due debt. About 28 percent of adults with a credit record had debt in collections in August 2021, a slight decline from February 2020 when about 30 percent had debt in collections. The share of borrowers with past-due debt declined for those borrowing student loans, credit card debt, auto and retail loans, and mortgages.
    • Alternative financial services loan (e.g., payday loan) use shows signs of financial hardship. In February 2021, 4.9 percent of adults with a credit file had used alternative financial service loans like payday loans, an increase from 4.4 percent in February 2020. About 9.5 percent of people with alternative financial services loans were 30 or more days delinquent in February 2021, compared with 11.5 percent in February 2020.
    • Racial disparities in credit health reflect historical inequities that reduced wealth and limited economic choices for communities of color. The credit health of major demographic groups improved during the pandemic, but gaps have not narrowed. Majority-Black, Hispanic, and Native American communities experience rates of subprime credit scores, debt in collections, and high-cost nonbank borrowing at least 1.5 times higher than rates in majority-white communities.

    Policy options

    COVID-19 created financial challenges for families across the US. Federal, state, and local policymakers responded with supports to help families weather the pandemic’s economic fallout. State governments play a significant role in distributing federal resources, filling gaps in the federal response, and enacting consumer protection regulations.

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    Policymakers could take the following actions:

    Employers can also support their workers’ financial health. Employers could explore benefits that help employees maintain financial stability, including health insurance, emergency savings incentives, low-cost loans or other emergency cash assistance, and financial coaching.

    What is credit health?

    Credit scores affect people’s ability to borrow, influencing their ability to buy a home or car or pay for emergency expenses. Credit can be vital to families who need to smooth their expenses until the next paycheck or pay for an emergency expenditure like a medical visit or car repair. Without access to credit—and preferably prime credit—many Americans with low incomes are stymied on their path to success.

    The financial cost is high for the 20 percent of Americans in the credit system who have subprime credit. When they seek to borrow, people with subprime credit scores often only qualify for loans with the highest interest rates. And debt payments may take up a large share of their income. Borrowers with subprime credit scores can pay nearly $400 more in interest for a $550 emergency loan over three months and $3,000 more in interest for a $10,000 used-car loan over four years compared with borrowers with prime credit scores.

    The COVID-19 pandemic is declared a national emergency, the first statewide shutdowns take effect, and economic relief bills are enacted
    The jobless rate peaks at 14.7 percent, and the first stimulus checks go out
    The US Centers for Disease Control and Prevention issues a national eviction moratorium
    The Delta variant emerges, and the second stimulus checks go out
    The American Rescue Plan Act of 2021 is signed to law, and the third stimulus checks go out
    All US adults become eligible for COVID-19 vaccines