SAN FRANCISCO, December 17, 2020 / PRNewswire / – Americans with bad credit are being hit hard by the system, and they know it, a new survey from Credit Sesame finds. In addition, their experience with the credit system is vastly different from that of good credit, and it affects almost every aspect of their lives – from mental health and personal relationships to living situations.
According to the research, that 5,000 adults in the United Statesthose with a bad credit score (300-549) are predominantly young, female and have a high school education or less. They’ve also been hit harder by the pandemic than most – 61 percent said it would take them between one and five years or more to recover financially, compared with 34 percent of Americans overall. And they report a very different experience with credit than the norm. Half (50 percent) said their first experience with credit was negative, and even more – 61 percent – said their overall experience with credit was negative, compared to 18 percent of Americans overall.
“When I went to college, they basically threw me a credit card and I didn’t know how to do it or what it was really about,” one survey respondent said. “So I maximized them and then I got more to spend and did that to the maximum, and then I screwed myself.”
This dichotomy is mainly reflected in how a credit score has hurt or helped them. Almost all Americans with bad credit (94 percent) can identify how their credit score has negatively impacted them in life. More than half (57 percent) have to work in cash or with a debit card because they don’t have a credit card, and half can’t buy a house or qualify for a car loan. Further:
- 28 percent cannot rent the apartment they want
- 22 percent cannot lease a mobile phone
- 20 percent cannot get a business loan
- 19 percent had to live with their parents longer than desired
- 14 percent have missed a job
- 10 percent have had problems with romantic relationships
Of those with bad credit, 79 percent say their credit score provokes negative feelings: 49 percent are “worried,” 46 percent are “ashamed,” and 30 percent are “angry.” This is a striking difference from Americans with good or excellent credit who cite the positive feelings their credit score evokes: 40 percent are “proud,” 40 percent are “happy,” and 34 percent feel “good.” Nearly half of those with bad credit (49 percent) try to hide their credit score from others – almost twice as many as the wider population (26 percent).
“It’s expensive to be credit poor, and the costs are more than just financial,” he said Jay Moon, General Manager of Credit, Credit Sesame. “Our recent research shows that bad credit negatively impacts mental health and the types of lifestyles people can use. The term ‘credit’ is often thrown around, but this research shows that it’s also about self-esteem and operating from day to day. “
When asked what factors contributed to their creditworthiness, 89 percent of those with bad credit barriers cite: nearly half (48 percent) have debt collection accounts, 40 percent say they can’t keep accounts or afford benefits , 32 percent have had unexpected medical expenses and 28 percent have been unemployed for more than six months.
This is in stark contrast to the experience of those with good (640-719) or excellent (720+) credit, who cited positives (87 percent) rather than impediments:
- 56 percent said they had many years of good credit history – only four percent of those with bad credit said this
- 50 percent said they always kept track of their expenses – only three percent of those with bad credit said this
- 49 percent said they never or rarely made a late payment – less than five percent of those with bad credit said this
- 45 percent said they worked really hard to build good credit – less than five percent of those with bad credit said this
And people with bad credit believe the system is unfair. While 66 percent of respondents said overall they believed their credit score accurately reflected whether they could be trusted to repay a loan, only 38 percent of those with poor credit agreed . In addition, about a third (34 percent) of people with bad credit believe that the financial services industry exists to hurt them.
While they are clearly frustrated with a system that appears to be stacked against them, many with bad credit say they are working hard to improve their credit and financial situation by reducing their debts (29 percent) and signing up for a credit guarding (15 percent), side jobs (14 percent), and careful handling of credit cards (14 percent) – only 19 percent reported it as a lost cause.
“The good news is that we see more and more consumers taking control of their own data to improve their credit score,” said Moon. “It’s a long game, but it starts with small steps.”
Credit Sesame conducted this research using an online survey prepared by Research method and distributed by Dynata below n = 5,000 adults in the United States. The sample was matched by age, gender, and ethnicity census to be nationally representative of the U.S. population. Data has been collected from October 16 to October 30, 2020.
About Credit Sesame
Credit Sesame’s mission is to help consumers build financial stability and ultimately create better opportunities for themselves and their families. Strong credit is inseparable from financial health and stability, and with the launch of Sesame Cash, Credit Sesame will help consumers manage both. Credit Sesame has helped millions of consumers improve their credit scores, increase their chances of approval, reduce credit costs and save money. Credit Sesame is funded by leading venture capital firms and strategic investors including Menlo Ventures, Inventus Capital, Glo Bespan Capital, IA Capital Groups, NortonLifeLock, Capital One Ventures and Stanford University, among other things. Credit Sesame currently operates in the US and Canada. For more information about Credit Sesame, visit www.creditsesame.com and move on Facebook, Twitter and LinkedIn.
SOURCE Credit Sesame