Certainly, no one on the planet aims for anything short of squeaky-clean credit. The reality, however, is that nearly half of Americans wrestle with serious money woes, making securing mortgages and purchasing houses very nearly impossible. In fact, PYMNTS [1] has coined a name for this struggling demographic: the “financial invisibles.”
To ascertain how this cash-strapped cohort accesses financial tools and manages their credit, PYMNTS teamed with Unifund to create the Financial Invisibles Index. The index analyzed the survey responses of more than 2,000 Americans about their financial habits and circumstances. (It’s worth noting that the study sought relatively low-income Americans to help deepen insights into the use of credit by “financially challenged” folks, the companies explained.)
After shaking out the data, the researchers pinpointed four personas of financial invisibles:
- No Worries: People who have no delinquencies and can fully participate in the financial system.
- Second Chances: Those who have had past delinquencies but can still participate in the financial system.
- On the Edge: People who struggle to make ends meet and have no delinquencies but are unable to participate in the financial system.
- Shut Outs: Those who have had delinquencies in the past and, as a result, can’t participate in the financial system.
It’s important to mention that a big swath of the so-called invisibles aren’t that way by choice and would much prefer to participate in the banking system, the study says. Which is to say they would love nothing more than to score a mortgage and buy a home. Unfortunately, a lack of access to credit and a poor credit rating often deter them from managing bill payments and seeking financial well-being, let alone from becoming homeowners.
To illustrate the low-credit point, for example: Shut Outs reported an average credit score of 525, while On the Edge members had an average score of 589. The No Worries group, however, noted an average score of 714.
As it relates to housing and homeownership, the key takeaway from this pretty much goes without saying: Whether visible or not, financial stability plays a huge role in a would-be buyer’s ability to procure a residence.
To view the full report, click here [2].