Pandemic-related income loss has consumers worried about credit, loans

Despite concerns, the average credit score has actually risen in recent months

The COVID-19 pandemic has brought on a lot of anxiety for a variety of reasons, and the same rings true with personal finance.

A recent report conducted by Finicity revealed that about 64% of respondents impacted by job/income loss due to the pandemic said that it’s hard to keep up with bills and payments. And, 95% of those impacted are concerned about their ability to rebuild credit and take out a loan after the pandemic ends.

In the last 8 months or so the average credit score has actually risen, Finicity CEO and co-founder Steve Smith said, which is largely a result of financial support like stimulus checks, the Paycheck Protection Program and lenders actively working with their consumers on payment holidays on loans.

“At some point we’re going to be back into the world of reality,” Smith told FinLedger. “So, lenders have this challenge of understanding what the core strength is. Is somebody in a position where they are employed, they have gainful employment, their financial situation is okay, or are they being propped up by stimulus, by unemployment benefits, by rent holidays and the like?”

What Smith found especially interesting is the sheer number of folks that expect their credit will take a hit in the future because of what they’re experiencing today.

The report also showed that 73% of respondents with a household income under $50,000 said their current financial situation has made it difficult for them to keep up with bills and payments. Meanwhile, 57% felt this way with a household income between $50,000 and $100,00 and 54% with an income over $100,000.

Finicity surveyed 2,000 consumers in June 2020 that was completed online. The respondents were random, voluntary and anonymous.

Finicity’s self-described mission is to help individuals, families and organizations make smarter financial decisions through safe and secure access to fast, high-quality data. The company launched its first financial product in 2000 and has since grown to provide financial data APIs, credit decisioning tools and financial wellness solutions. In November, the Department of Justice gave Mastercard the green light to proceed with its planned $825 million acquisition of Finicity.

Going forward, Smith said that Finicity will continue to focus on open banking with “a heavy dose of analytics and solutions around credit decision [making], lending, account opening, payments and financial management.” 

As for the open banking industry in general, Smith said that the sector was only going to continue to find solid footing and accelerate. But, open banking companies need to continue to work “with regulators to make sure that we’ve defined the rails, created the safeguards and put the consumer directly in the center of that universe.”

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