The COVID-19 pandemic and resulting economic downturn have led to mounting financial uncertainty and anxiety for many Americans. They have lost jobs at staggering rates, and of those who were fortunate enough to keep their jobs, many still saw an impactful reduction in their income. But a closer look at these losses unveils a much more dire situation for American families with the lowest household incomes, who are already financially vulnerable.
In our recent survey report, Combating the Emerging COVID Credit Crisis, we surveyed 2,000 US consumers about the financial impact of the pandemic. The survey found that 55% of Americans have had their jobs or income impacted by the economic downturn, but when we examine the responses of those with household incomes below $50,000, that number jumps to 62%, showing that the lowest income Americans have taken the hardest hit.
The job and income loss is leading to many of those affected already falling behind, with 64% of all those who have been impacted saying they’re struggling to keep up with bills and payments, but further analysis shows the lowest income Americans are feeling this pain most acutely. The survey found that 73% of those making below $50,000 per year say they’re struggling to keep up, compared to 57% of those with income between $50,000 and $100,000, and only 54% of those with income over $100,000 who said the same.
To compound the issue, the people who are taking the greatest financial hit from the pandemic and resulting recession also expressed the greatest anxiety about their credit, with 68% saying they’re worried their credit will be negatively impacted, compared to only 52% of those with income over $100,000.
In addition to the financial impact and credit anxiety, the lowest income Americans also signaled lagging financial literacy. Only 51% of those with a household income under $50,000 said they know what financial information lenders are using to determine their creditworthiness, compared to 61% of those who make between $50,000 to $100,000, and 68% for those who make over $175,000.
With over half of respondents essentially in the dark about their financial data, showing the greatest concern over their credit health, and struggling under the weight of job and income loss, the time has never been better to examine the changes needed in the credit-decisioning process. Financial inclusion will come when all consumers are empowered with control and visibility into their own financial data, and how it’s used by lenders when they evaluate creditworthiness. For consumers and lenders alike, the COVID pandemic has put enormous urgency on the need to reevaluate how financial data is used in the credit review process.
For this and more on the financial impact of COVID-19, download our new report.