Categories

Research

COVID-19 Impact: Changes to Consumer Debt and Credit

As the nation continues to manage the impact of the COVID-19 outbreak, swift changes to Americans' everyday lives have already begun to affect consumer finances.

Since governments around the world began issuing shelter-in-place orders in an effort to mitigate the disease's spread, millions of Americans have lost their jobs, had their hours reduced or pay cut. These disruptions have slowed large segments of the U.S. economy, spurring a recession that ended the nation's longest-ever period of economic expansion.

Loss of income and uncertainty about the economy can quickly alter a consumer's spending behavior, as well as how they interact with debt and credit. To see what effects the outbreak has had thus far, we took a look at several factors and how they've changed over the course of just a few months.

COVID-19 Effects on Consumer Finances

As part of our ongoing commitment to help consumers manage the impacts of COVID-19, Experian analyzed internal and external data to show how consumer finances have changed in recent months. Our analysis is based on historic monthly consumer credit data, unless otherwise noted.

The data used for this research is based on a nationally representative sample of Experian's main consumer credit data. Credit score data is based on VantageScore 3.0. The data attributes and sample sizes for this research may not exactly match other Experian analyses, and thus a slight variance in some statistics may exist.

As Americans continue to manage the effects of the pandemic, the data included in our analysis will continue to evolve. The information included here represents only a momentary snapshot of consumer finances. As time goes on—especially as certain economic stimulus and relief measures expire—these trends may change. We will continue to publish additional insights as newer data becomes available.

Changes in Consumer Finance and Credit Behavior

To provide a quick and easy-to-understand overview of how consumers in each state have been impacted by COVID-19, this map shows how economic metrics including how consumer debt balances and credit scores have changed since the same time last year. Annual comparisons are based on May 2020 data (the most recent available) and are compared with the equivalent data from the same month in the prior year.

Within the U.S., our analysis showed no statistically significant correlation between state positive cases and changes in consumer debt or credit scores. Similarly, there is no immediate relationship between states with early stay-at-home orders, and their change in debt or credit.

States With Earliest Stay-at-Home Orders
StateStay-at-Home Order BeganTotal Debt Change Since January 2020Score Change Since January 2020
CaliforniaMarch 19+0.6%+0.7%
IllinoisMarch 21-2%+1%
New JerseyMarch 210% +0.7%
New YorkMarch 22+0.4% +1%

Source: Experian and VantageScore data, May 2020. Stay-at-home order dates from Kaiser Family Foundation.

States With the Largest Increase in Unemployment

Unemployment and loss of income can wreak havoc on credit and finances—especially for the tens of millions of people who have little or no savings they can tap to cover an emergency. The inability to cover existing debt payments can bring down credit scores, and loss of income generally means making sacrifices that can greatly impact someone's everyday life.

In an effort to contain the outbreak's economic impact, Congress passed the Coronavirus Aid, Relief and Economic Security (CARES) Act in March. Among other things, the CARES Act significantly expanded unemployment benefits and gave a one-time stimulus payment to eligible Americans. This aid was distributed to soften the impact unemployment and loss of income would have on the nation.

Though it seems logical that debt and credit would be most impacted in states with high rates of unemployment, our analysis found no strong correlation between a state's increase in unemployment rate and the growth or decline of debt or credit.

States With Largest Increase in Unemployment Rate Since 2019
StateChange in Unemployment RateAvg. Total Debt / % ChangeAvg. Score / % Change
Nevada+24%$95,736 (+2%)670 (+1.1%)
Hawaii+20%$138,727 (+6%)700 (+0.1%)
Michigan+18%$66,825 (+1%)689 (+0.6%)
New Hampshire+14%$88,680 (+3%)710 (+0.4%)
Indiana+14%$67,767 (0%)681 (+0.4%)
Source: Experian and VantageScore data from May 2019 to May 2020. Unemployment data is from the Bureau of Labor Statistics from May 2019 to May 2020.


Average Total Debt Is Down; Credit Scores Are Up

Despite unemployment rapidly growing to record levels throughout the U.S., the average amount of individual debt has consistently declined since the onset of the pandemic. Average credit scores are increasing at a higher rate than during this same period last year, and credit utilization—how much available revolving credit a consumer is using—is at a record low for the past five months, according to Experian data.

From January 2020 to May 2020:

  • The average VantageScore increased by five points.
  • Average total debt balance shrank by 1%.
  • Average credit card balances decreased by 14%.
  • Consumer credit utilization decreased by 5 percentage points (from 30% to 25%).
  • The average number of 30-day delinquencies per consumer decreased 5% (from 0.4 to 0.38).
Overall Change by Score Band Since January 2020
Average ScoreAverage Total DebtCredit Card BalanceCredit Utilization
300-499
Very poor
+0.9%-6.9%-12.6%-12.3%
500-600
Poor
+0.1%-2.3%-8.1%-10.6%
601-660
Fair
+0.1%-1.5%-7.2%-7.7%
661-780
Good
-0.1%-5.3%-11.8%-7.1%
781-850
Excellent
+0.2%+3.6%-23.2%-21.5%

Source: Experian and VantageScore data from January 2020 to May 2020
 

These trends show that, broadly, consumers across the U.S. have made some fairly drastic changes to their financial habits over the span of just a few months. Since the beginning of the pandemic, consumers appear to be either paying down their debt or at least not adding to their overall balances. And possibly spurred by the lowered reliance on revolving credit, the average VantageScore increased by double the rate it did during the same period in 2019.

The only debt category to see an increase was average personal loan balance, which has grown 2% since the year began. Breaking this down, most of the growth (+1.8%) occurred between the beginning of March and the end of May, which indicates that this increase could be a result of some heightened borrowing following the onset of the pandemic.

Overall Change in Consumer Finances Since January
Financial AttributeJanuary 2020May 2020Change
Average Score681686 +1%
Total average debt balance$89,820$89,273 -1%
Average credit card balance$6,193$5,338 -14%
Average personal loan balance$15,965$16,257 +2%
Average credit utilization rate30%25%-15%
Average # of 30-day delinquencies in past 12 months0.400.38-6%

Source: Experian and VantageScore data

Average Increase in VantageScore by State

Though the average credit score in the U.S. can—and often does—fluctuate throughout the year, consumers' average VantageScore has changed much more rapidly in the past five months than during the same time period in 2019.

Since January 2020, the average VantageScore increased by five points—growing from 681 in January to 686 in May, according to Experian data. This 1% increase is more than triple the 0.3% growth seen during the same months the prior year.

States With Largest Score Increases
StateAverage Score IncreaseAverage Total Debt
Alaska+1.4% $96,855
District of Columbia+1.3% $147,080
New Mexico+1.3% $77,490
Wisconsin+1.3% $77,439
Delaware+1.2% $91,566

Source: Experian and VantageScore data, January 2020 to May 2020

Americans See Momentary Debt Decreases, Credit Score Increases

Despite the abrupt changes to employment, income and commerce since the onset of the COVID-19 crisis, consumer credit files are not yet showing signs of distress. While it's not to say that consumers' finances are withstanding the current economic pressures unscathed, when averaged across the larger population, Experian data shows clear signs of decreasing debt and growing credit scores.

Over the coming months, we'll continue to gauge consumer finances as the country continues to react to the ongoing health and financial crisis. Spending may also change as local economies begin to reopen, and debt levels could fluctuate as economic relief options run out.

Methodology: The analysis results provided are based on an Experian-created statistically relevant aggregate sampling of our consumer credit database that may include use of the FICO® Score 8 version. Different sampling parameters may generate different findings compared with other similar analysis. Analyzed credit data did not contain personal identification information. Metro areas group counties and cities into specific geographic areas for population censuses and compilations of related statistical data.

FICO® is a registered trademark of Fair Isaac Corporation in the U.S. and other countries.