COVID-19: Credit Utilization Drops as Consumers Cut Spending

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Compared with the months before the COVID-19 pandemic, U.S. consumer spending is down. And as Americans spend less, their use of revolving credit is on the decline.

From January 2020 to May 2020, individual consumers reduced their credit card debt by 14%, according to Experian data. With this drop came a simultaneous decrease in credit utilization ratios, from an average of 30% to 25%.

Credit utilization ratios show how much available credit a consumer is using at any given time. More specifically, a person's credit utilization ratio measures the sum of their total balances on revolving debt (mainly credit cards) divided by the sum total of all their credit limits. Multiply that number by 100, and you have a credit utilization ratio.

After payment history, credit utilization is the most important factor in calculating a credit score. Changes to utilization ratios can have significant effects on scores: A decreased utilization ratio typically helps credit scores, while an increased ratio can hurt them. A credit utilization ratio under 30% is recommended to avoid damaging credit scores.

Research and Analysis on the Impact of COVID-19

As part of our ongoing commitment to helping consumers manage the impacts of COVID-19, Experian analyzed internal data to find out how consumer credit utilization has changed in recent months. The analysis is based on monthly consumer credit data between January 2020 and May 2020.

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 aspects of economic stimulus and relief efforts expire—these trends may change. We will continue to publish additional insights as newer data becomes available.

Overall Credit Utilization Levels Down Since January

Since the onset of the pandemic, consumers have shifted their credit usage, resulting in plummeting utilization rates between January and May 2020. This is a major difference from this same period in 2019, when the utilization rate decreases were a third of those seen in 2020.

Overall Average Utilization Ratio Comparison

Source: Experian

Since credit utilization is the second most important aspect of credit scores, it's not surprising to see that average credit scores have gone up as utilization has fallen.

Average VantageScore Change Since January 2020
January 2020May 2020Change
681686+5 points

Source: Experian

Utilization Ratios See Consistent Double-Digit Decreases Across All States

Across the country, consumer credit utilization has seen double-digit decreases in all states. This is in line with consumer credit card debt, which also decreased in each state.

North Dakota saw the biggest decrease in average utilization, with credit utilization ratios dropping by 22% between January and May 2020. Consumers in Hawaii and Montana both saw 10% decreases in their average utilization during this same period, which was the minimum change among states.

Average Utilization Ratio by State Since January 2020
StateJanuary 2020May 2020Change
District of Columbia29%24%-17%
New Hampshire28%23%-16%
New Jersey27%24%-13%
New Mexico34%27%-21%
New York29%24%-17%
North Carolina31%27%-14%
North Dakota29%23%-22%
Rhode Island29%24%-15%
South Carolina32%28%-14%
South Dakota26%22%-14%
West Virginia32%27%-14%

Source: Experian

Top and Bottom Credit Score Ranges See Largest Utilization Decreases

Consumers with top-tier credit scores saw the largest decrease in credit utilization since January, according to Experian data. People with scores between 781 and 850, who already had the lowest credit utilization among score ranges, reduced their average utilization ratio by 22%. Consumers in the lowest score range saw the second-biggest decrease in utilization despite carrying the highest average utilization among scoring ranges.

Average Utilization Ratio by Score Band Since January 2020
VantageScore RangeJanuary 2020May 2020Change
300-499 Very poor78%68%-12%
500-600 Poor75%67%-10%
601-660 Fair59%54%-7%
661-780 Good26%24%-8%
781-850 Excellent6%5%-22%

Source: Experian

Generation Z Records Largest Change in Utilization

Since January, credit utilization saw the greatest changes across younger age groups, according to Experian data. Members of the youngest group of U.S. adults, Generation Z, had the biggest decrease in average utilization ratio—bringing their utilization, which was previously higher than every generation, even with millennials and lower than Generation X.

Average Utilization Ratio by Generation Since January 2020
GenerationJanuary 2020May 2020Change
Generation Z38%30%-21%
Generation X36%31%-14%
Baby boomers25%22%-12%
Silent generation14%12%-15%

Source: Experian

Shift in Utilization Shows Slowed Reliance on Revolving Credit

Utilization rates are based on consumers' revolving credit balances and can shift depending on how they use revolving debt over a given period of time. Though spending is always changing and utilization remains in flux, large shifts in utilization like the ones seen in recent months signify a distinct departure in consumer credit behavior. This change is confirmed when looking at consumer credit card balances, and the benefit can be seen when looking at the average credit score in the nation.

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.