March is National Credit Education Month, which means there’s no better time to help support your employees by educating them on the importance of their credit score, the role it plays in financial wellness, and the tools available to improve it.
The quality of your credit score can have a major impact on your life and can affect whether you’re approved for an apartment lease, home mortgage, or insurance policy. A person’s credit score can also impact the amount of credit extended as well as the type of automobile financing and interest rates which might be offered.
Despite the importance of a credit score, recent analysis found that only 42% of people have super prime credit, 12% have prime credit, 6% have near-prime credit, 6% have subprime credit, and 13% have deep subprime credit.1 Lastly, 11%, around 28 million Americans, are “credit invisible,” meaning they have no credit score at all while 8% of the population, roughly 21 million, are considered “unscorable” due to not having enough information to create a traditional credit score.2
This credit disparity has widespread effects on the ability of individuals to avoid debt, build wealth and strengthen their financial wellness. Without a credit score, or with a low score, access to traditional financial products becomes difficult to impossible.3 Unfortunately, when the population of “credit invisible” or “unscorable” individuals is broken down further, racial disparities become clear:
- 54% of Black Americans report having no credit or a poor to fair credit score.
- 41% of Hispanic Americans report having no credit or a poor to fair credit score.
- 37% of White Americans report having bad or no credit.4
These racial differences have complex contributing factors including lower average take home pay and higher amounts of student loan debt, which can make building credit and saving challenging. Credit invisibility also falls disproportionately on the young as around 40% of “credit invisibles” are under age 25.5
With limited access to financial services and products, many people with low or no credit may find themselves trapped, unable to afford expenses, and stuck living paycheck-to-paycheck. The increasing use of Buy Now Pay Later options in retail settings has provided greater access to financing for more people, but that also comes with an increased risk of individuals overextending and taking on more debt than they can afford.6 Those who are able to acquire credit cards might find they are approved only with low credit limits and high interest rates. This creates a temporary solution to paying for immediate needs but can lead to increased debt and a higher chance of late payments, late fees, and a negative impact on your credit score.
In the last year of record-high inflation, the number of people who have had to turn to credit cards to meet immediate needs has increased, which has likewise increased the amount of credit card debt Americans have.7 Federal Reserve interest rate hikes compound the problem, adding to the credit debt load, and causing 69% of Americans to have financial concerns this year.8
In order to address the needs of many Americans, Kashable recognizes the importance of financial wellness benefits to help support the needs of traditionally financially underserved groups, including “credit invisibles” and “unscorables.” Committed to creating pathways to financial wellness, Kashable is leading the way in creating opportunities for more individuals to build and improve their credit.
In order to fulfill our mission to support more individuals’ journey to financial wellness, Kashable’s financial wellness program offers low-cost loans, a free credit monitoring tool, live financial coaching, and financial literacy library to support employees as they embark on their financial wellness journey.
This month, for the millions of Americans with no credit or who want to improve their credit, employers can add Kashable as an employee benefit to help employees begin their financial wellness journey.
[1] https://www.fool.com/the-ascent/credit-cards/articles/how-many-americans-have-good-credit/
[2] https://www.experian.com/blogs/insights/2022/01/powering-financial-inclusion/
[3] https://www.foxbusiness.com/personal-finance/consumers-no-credit-score-transunion
[4] https://www.cnbc.com/2021/01/28/black-and-hispanic-americans-often-have-lower-credit-scores.html
[5] https://www.moneygeek.com/credit-cards/analysis/credit-invisibility/
[6] https://files.consumerfinance.gov/f/documents/cfpb_buy-now-pay-later-market-trends-consumer-impacts_report_2022-09.pdf
[7] https://www.usatoday.com/story/money/economy/2023/02/16/credit-card-debt-record-high-and-delinquencies-rising/11271305002/
[8] https://www.nerdwallet.com/article/credit-cards/average-credit-card-debt-household