The COVID-19 pandemic has and continues to cause job and income loss for millions of Americans, as businesses are forced to close their doors or scale back indefinitely. This loss has led to the inability for many Americans to keep up with bills and payments, and for many, increased financial anxiety.
In our recent survey report, Combating the Emerging COVID Credit Crisis, we found that 55% of Americans have had their jobs or income impacted by the economic downturn. As a result, not only are many struggling to keep up with payments, but nearly all are also concerned about their ability to rebuild their credit or take out a loan after the pandemic.
This anxiety over financial health post-COVID is especially true for lower income Americans, who we found are being impacted at a higher rate than those with higher incomes, citing higher job losses and greater credit anxiety.
This loss and anxiety presents us with a unique opportunity to usher in long overdue enhancements to the credit process, and our survey found a strong consumer desire to revisit the way credit is granted. This sentiment among Americans is not new, but the pandemic and resulting economic impact has accelerated the urgency of this issue.
Consumers want a credit review process that provides a fair assessment of their creditworthiness by offering a more complete look at their finances and their ability to repay.
The pandemic has impacted millions of Americans’ financial health and an overwhelming number of consumers believe that it’s unfair for a person’s credit to be impacted by temporary circumstances or something that’s out of their control… like a global pandemic.
Another 82% of respondents said the current credit review process and criteria needs to change in order to make it easier for responsible borrowers to improve their creditworthiness, and 64% of respondents said that they don’t believe the current system gives lenders a complete picture of a person’s creditworthiness.
In addition to a more complete credit process, consumers also signaled a growing need for greater control over their financial data, and by extension, over their own financial health. The report found 86% of respondents want more insight and control over the personal financial information that lenders use to determine their creditworthiness when taking out new credit or a loan.
And consumers are willing to work with financial institutions to achieve this. When asked what types of information they’d be willing to share if it helped them qualify for a loan or get a better interest rate, we found that 66% are willing to share their current income information, 65% will share payment history for their utilities and cell phones, and 54% will share their rental payment history.
Control over and transparency into financial data becomes even more critical as we look again at lower income Americans, the group hit hardest by the financial loss. Our report found that for households making less than $50,000 per year, only 51% know what financial information lenders are using to determine their creditworthiness. What is especially concerning is this financial literacy appears to increase with income, as 61% of households making over $50,000 said they know what data is being used, and for households making more than $175,000 per year, 68% said they know what financial information lenders are using to determine their creditworthiness.
Increased financial literacy is essential to closing the financial inclusion gap, and it brings further into focus the growing need for transparency and control over financial data. A more complete credit-decisioning process will open the door for more empowered consumers and greater overall financial health for all Americans.