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This report probes the factors driving differences in community growth and income in the District of Columbia by analyzing varied indicators of access and health in the credit economy from 2007 to 2017.

Unequitable Growth & Concentrated Financial Vulnerability in the Nation’s Capital: Consumer Credit Trends in the District of Columbia, 2007-2017

The report seeks to answer the following questions:

  1. Are consumers in D.C. overall on better financial footing compared to before the Great Recession, and if not, where are the most pronounced market weaknesses?
  2. What specific vulnerabilities do low- and moderate-income communities experience in the District of Columbia, and what can be done to improve those consumers’ financial stability?
  3. How does the District of Columbia compare to adjacent counties in the Washington MSA, both in terms of residents’ risk of future economic upheaval and opportunities for growth?

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:

  • Included – The portion of adult residents aged 25 years and older with an active credit file and an Equifax Risk Score
  • Revolving Credit – The portion of included consumers who have at least one credit product that automatically renews as debts are paid off and who have nonzero credit limits on those 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:

  • Prime Credit – Portion of consumers (excluding unscored consumers) with Equifax Risk Scores of 660 or above
  • Subprime Credit – Portion of consumers (excluding unscored consumers) with Equifax Risk Scores below 6002 
  • Low Credit Utilization – Portion of consumers in the credit economy who have at least 70% available capacity on their revolving credit limit
  • Credit Constrained – Portion of consumers in the credit economy who have outstanding revolving debt that is more than 75% of their revolving credit limit

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:

  • Auto – Automobile loan debt from both monoline automobile finance companies and multipurpose lenders
  • Credit Card – Debt from general-purpose credit cards, excluding debit cards and credit cards for use at specific retailers
  • Home Equity Line of Credit3 – Debt from revolving home equity
  • Mortgage Debt – Debt from first- and junior-lien mortgages and home equity installment loans
 
1

Thomas Durkin, Gregory Elliehausen, and Todd Zywicki, “Consumer Credit and the American Economy: An Overview,” Journal of Law, Economics & Policy, George Mason University (2014).

2

Consumers with credit scores between 600 and 660 are considered ‘Near Prime’ and will not be the focus of discussion in this report.

3

Due to insufficient sample sizes, data for the severely delinquent HELOC debt indicator are not shown.

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