Press Release

New Report Finds Improving Credit Reports for Most Americans

Repayment histories improved for borrowers in low and middle-income areas, but student loan default rates remain elevated
March 01, 2022

NEW YORK - The Federal Reserve Bank of New York today released the second installment of The State of Low-Income America: Credit Access and Debt Payment. The report finds that payment rates and median credit scores rose for all income groups through September 30, 2021. While overall bankruptcies declined substantially during the pandemic and new foreclosures were effectively halted, the report also finds that student loan default rates remain more than three times higher among borrowers in low- and moderate-income areas than in high-income areas.

The report examines debt holdings across income groups and uses anonymized Equifax credit data merged with geographic income data from the American Community Survey.

"Although the COVID pandemic has taken a heavier toll on lower-income Americans, our data suggest that most borrowers—including those in lower-income areas—have been managing their financial responsibilities and debt repayments," the authors stated. "We plan on monitoring how lower-income households weather the unwinding of policy interventions that have enhanced their financial stability during the past two years."

With a special focus on student loans, the report describes how most student loans were eligible for CARES Act emergency relief, pausing loan repayment through May 1, 2022. As a result, borrowers with student loans saw a sharper increase in their credit score compared to borrowers without student loans.

Among the other key findings:

  • The median credit scores of student loan borrowers in lower income areas increased more sharply than the medians in high-income areas.
  • Controlling for income, significant differences in default rates on student loans exist across geographies, with some Metropolitan Statistical Areas exhibiting particularly elevated.
  • Comparable debt holdings in auto and student loans across income groups point to considerably higher non-housing debt-to-income ratios among low-income borrowers.
  • Mortgages are common among borrowers in higher-income areas and rarer among borrowers in lower-income areas.

The report is the second in a series. The authors intend to continue to monitor debt holdings across income groups in 2022.

The full report is available on the New York Fed’s website.

Ellen Simon
(347) 978-3036
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