This report explores differences in community growth and income by analyzing indicators of access and health in the credit economy from 2007-2017.
The report seeks to answer the following questions:
Research Approach
To address these questions, this report analyzes different indicators of access and health in the credit economy from 2007 to 2017. Consumer credit is an essential component of growth in the American economy, driving consumer spending on large items.1 However, as the financial crisis of 2007-2008 dramatically revealed, poorly allocated credit can spark instability. Measures of consumer credit can therefore reveal the extent to which consumers have recovered from the economic downturn and indicate areas of weakness in the economy.
The report discusses consumer credit data from the Federal Reserve Bank of New York’s Consumer Credit Panel/Equifax (CCP) for adults aged 25 and older in the District of Columbia overall, in the adjacent counties in the Washington MSA and in Baltimore, Maryland. Furthermore, the report analyzes data within individual communities in D.C. (defined with ZIP code boundaries), as well as between groups of communities defined by their income and growth levels. Specifically, the report groups data among consumers in low-income, moderate-income, mid-income/mid-growth, mid-income/high-growth and high-income areas of the city (for more information on geographic scope and segmentation group definitions, see About the Data).
The report will analyze trends for three groups of indicators: Access, Health & Utilization and Debt & Payment History.
Access
Indicators of credit access measure residents’ ability to obtain credit when it is needed or desired. In order to access credit, one first needs a credit file and credit score with a major credit bureau (such as Equifax, Transunion, etc.). Even when someone is included in the credit economy, however, one may not be able to easily and quickly take out debt if he or she does not have a revolving credit product (such as a credit card or home equity line of credit). In addition to credit inclusion, therefore, indicators in this category will also measure the prevalence of revolving credit products:
Health & Utilization
Indicators of health and utilization will probe credit scores and utilization levels. For indicators of credit health, this report uses Equifax Risk Scores, which range from 300 to 850. Broadly, these indicators will reveal whether consumers are well-positioned to take on more debt in the future and whether their income is keeping up with their credit habits. Specifically:
Debt & Payment History
Indicators of debt and payment history include a range of different types of debt. The report will analyze changes in median debt and severely delinquent debt (at least 90 days past due) among borrowers of each of the following types:
Thomas Durkin, Gregory Elliehausen, and Todd Zywicki, “Consumer Credit and the American Economy: An Overview,” Journal of Law, Economics & Policy, George Mason University (2014).
Consumers with credit scores between 600 and 660 are considered ‘Near Prime’ and will not be the focus of discussion in this report.
Due to insufficient sample sizes, data for the severely delinquent HELOC debt indicator are not shown.