Despite a significant rise in household incomes, consumers struggling with debt are often in worse shape and further behind financially now than those who were dealing with these issues during the pandemic, according to a new study by Achieve, the digital personal finance firm.
Achieve explains that it has “helped over 1.5 million consumers resolve or consolidate over $24 billion in debt and offers a full suite of digital personal finance products and services to meet the needs of everyday Americans, wherever they are on their financial journey.”
Achieve has helped over 1.5 million consumers “resolve or consolidate over $24 billion in debt and offers a full suite of digital personal finance products and services to meet the needs of everyday Americans, wherever they are on their financial journey.”
To examine how the profile of consumers who are struggling with debt has evolved since the pandemic, Achieve analyzed consumers “who sought help with their finances by enrolling in debt resolution in 2020 and 2023.” The study found that “while median household incomes are higher, these consumers also have lower credit scores, higher credit card utilization rates and tend to be younger.”
Income — The Great Resignation phenomenon “that emerged during the early recovery from the pandemic resulted in higher wages for many Americans, and debt resolution members are no exception. The average household income of debt resolution members was $59,900 through the first nine months of 2023, up 37% from $43,598 in 2020.”
Credit Card Utilization — The ratio of outstanding debt “to total available credit on revolving accounts like credit cards is a key factor in assessing financial stress and one of the most influential factors used to calculate consumer credit scores.”
The credit card utilization rate of debt resolution members “was 76% in 2023, compared to 69% in 2020.”
Credit Score — Consumers who enrolled in debt resolution in 2023 “have a median credit score of 581, compared to a median score of 601 in 2020.”
While the typical debt resolution member is still within the “Fair” range of credit scores, this shift is indicative of the heightened strain consumers are facing.
Age — The typical age of debt resolution members has decreased since the pandemic, with a median age of 44 in 2023, compared to 52 in 2020.
Achieve believes this is the result of two factors: more consumers falling behind financially earlier in their lives, and a stronger motivation to seek out help before debt problems worsen.
This trend is further demonstrated by shifts in the generational breakout of Achieve’s debt resolution members.
“When consumers reach out to Achieve’s certified debt consultants, it’s often the first time they’ve talked to anyone else about their financial challenges,” said Achieve Co-Founder and Co-CEO Andrew Housser. “There is still a strong stigma around debt that often results in hesitancy to take action, but that is slowly starting to change.”
Methodology
The data and findings presented are “based on a representative sample of the over 200,000 active members enrolled in debt resolution products and services offered by Achieve and its affiliates.”
Annual comparisons are based “on monthly averages for full-year 2020 and Jan.-Sept. 2023.”
To date, Achieve has served “over 1.5 million customers and has resolved or consolidated over $24 billion in debt.”