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Credit Score Trouble: 1.2 Million More Americans Just Became ‘Subprime Borrowers’
By Adam Hardy MONEY RESEARCH COLLECTIVE
Delinquencies are on the rise, according to a new report from VantageScore.
Americans are falling behind on their credit and loan payments, pushing many into the lowest credit tier possible.
Compared to last year, 1.2 million more Americans are now considered “subprime borrowers” — or those who have credit scores in the 300 to 600 range — according to a Money analysis of the latest data released by the credit-scoring firm VantageScore.
Overall, more than 47 million Americans fall into VantageScore’s subprime-borrower category as of February 2024, our analysis shows.
Developed by the “big three” credit bureaus Equifax, Experian and TransUnion, a VantageScore is essentially a brand-name credit score. Scores range from 300 to 850 and are broken into four categories: subprime (300-600), near prime (601-660), prime (661-780) and super prime (above 780).
An uptick in delinquencies on all types of loans — including auto loans, credit cards, mortgages and personal loans — and across all credit-score tiers is contributing to plummeting scores for some folks, according to VantageScore.
When people have a credit score 600 or below, it becomes exceedingly difficult to participate in the U.S. financial system and modern daily life as a whole.
For instance, many lenders turn away subprime borrowers or charge them exorbitant annual percentage rates. Beyond loans, internet and phone plans, security deposits and even rent payments can increase in cost as a result of a low credit score. Employers are increasingly considering credit scores in their hiring decisions as well.
Credit score trends show ‘a tale of two consumers’
According to VantageScore, the average credit score for all Americans is 701 and remains unchanged from last year. However, while the average VantageScore is holding steady, Americans’ credit scores are getting increasingly polarized.
About a third of Americans have prime scores, in the 661 to 780 range, making it the largest credit-score category and the main demographic of lenders.
But VantageScore notes that this group is shrinking, with more people either ascending into the “superprime” category — with near-perfect credit scores — or they’re falling into the subprime category.
“The tale of two consumers is becoming more pronounced,” said Susan Fahy, chief digital officer at VantageScore, in the data report.
Fahy suggested today’s high-interest rate environment — engineered by the Federal Reserve to combat inflation — could be behind the trend. Americans with near-perfect credit are still able to spend and borrow as they need. Meanwhile, “subprime consumers are finding it increasingly difficult to stay current on credit payments,” she added.
A separate report released last month from rival credit-scoring firm FICO largely supports these findings. FICO found that, for the first time in over a decade, the average FICO score ticked down last year, to 717.
Lingering inflation and high interest rates are likely to blame for people falling behind on their debt payments, FICO said.
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Adam Hardy is Money's lead data journalist. He writes news and feature stories aimed at helping everyday people manage their finances. He joined Money full-time in 2021 but has covered personal finance and economic topics since 2018. Previously, he worked for Forbes Advisor, The Penny Hoarder and Creative Loafing. In addition to those outlets, Adam’s work has been featured in a variety of local, national and international publications, including the Asia Times, Business Insider, Las Vegas Review-Journal, Yahoo! Finance, Nasdaq and several others. Adam graduated with a bachelor’s degree from the University of South Florida, where he studied magazine journalism and sociology. As a first-generation college graduate from a low-income, single-parent household, Adam understands firsthand the financial barriers that plague low-income Americans. His reporting aims to illuminate these issues. Since joining Money, Adam has already written over 300 articles, including a cover story on financial surveillance, a profile of Director Rohit Chopra of the Consumer Financial Protection Bureau and an investigation into flexible spending accounts, which found that workers forfeit billions of dollars annually through the workplace plans. He has also led data analysis on some of Money’s marquee rankings, including Best Places to Live, Best Places to Travel and Best Hospitals. He regularly contributes data reporting for Best Colleges, Best Banks and other lists as well. Adam also holds a multimedia storytelling certificate from Poynter’s News University and a data journalism certificate from the Investigative Reporters and Editors (IRE) at the University of Missouri. In 2017, he received an English teaching certification from the University of Cambridge, which he utilized during his time in Seoul, South Korea. There, he taught students of all ages, from 5 to 65, and worked with North Korean refugees who were resettling in the area. Now, Adam lives in Saint Petersburg, Florida, with his pup Bambi. He is a card-carrying shuffleboard club member.