We’d be hard-pressed to remember an event in our lifetime that has had the kind of global impact we’ve seen with the COVID-19 pandemic. As experts grappled with how to combat a virus that sometimes grew exponentially in a day’s time, businesses shuttered their doors, consumers retreated to the safety of their home, employees began to work remotely, and the world closed seemingly overnight.
And in the ultimate insult to injury, a sharp economic downturn and the reality that millions of Americans lost their jobs and income left us facing yet another crisis. Those millions of Americans out of work or with lower incomes are now struggling to keep current on payments, threatening their credit scores and ushering in a credit crisis. We haven’t seen the total impact yet.
Finicity recently released a report, Combating the Emerging COVID Credit Crisis, based on a survey of 2,000 US consumers. We examined the financial impact of COVID, how consumers expect their credit to be impacted, and whether they think the current credit review system warrants a fresh look as we stare economic recovery in the face.
Our survey found that when you look not just at job loss, but at Americans who also saw their incomes impacted by COVID, over half of Americans were left facing a financial hit. We found that 55% of respondents have lost their jobs or had their income impacted because of COVID-19:
- 29% said they experienced a temporary job loss or income reduction
- 15% said they experienced permanent job loss or income reduction
- 11% said they lost commissions, bonuses or other financial resources they were relying on
This financial loss has had immediate impact, as most who experienced job or income loss said they’re struggling to keep up financially as a result, with 64% of those impacted saying it has made it difficult for them to keep up with bills and payments, and 56% of those impacted saying their ability to make credit or loan payments has been affected.
The implications of a credit crisis are tremendous. Businesses will eventually reopen and many people will go back to work as the COVID pandemic eventually subsides. In fact, the survey found that over half (57%) of those impacted say they’re confident they’ll be able to return to work or their previous income level once the COVID-19 pandemic eases.
But while retail purchases and going back to restaurants will bring some economic boost, real economic recovery will be driven by significant purchases like homes, cars and big ticket retail items like appliances. For many consumers, the ability to make these purchases is dependent on their ability to borrow money through loans or credit.
So what happens when the financial impact of COVID job loss leaves them unable to qualify for the loans or credit needed to make purchases needed for economic recovery?
According to the survey, 62% of those impacted said they had excellent or good credit prior to the COVID-19 crisis, but 61% of those impacted are also concerned their credit will be negatively impacted because of their financial situation.
And then there’s one of the most telling data points to come from this survey — 95% of those impacted said they’re concerned about their ability to rebuild their credit or take out a loan following this financial situation. Nearly all consumers fear they won’t qualify to make the purchases that they not only need for their lives, but that our economy will rely on as it recovers.
There has long been a growing discussion among financial institutions that a better, more complete credit review process is needed. There has also been a growing sentiment among consumers that they need and want more control over and visibility into their own data and how it’s used.
Now, these two needs converge in the middle of a pandemic. This opportunity is our chance to usher in change that will finally give financial institutions the ability to more accurately determine creditworthiness, and give consumers control over their own financial data, and ultimately, their own financial health.
For this and more on the financial impact of COVID-19, download our new report here: https://www.finicity.com/credit-impact-report/