Many Americans are still struggling with mortgage debt, which is the third most-popular form of debt in the nation. Much of this debt stems from borrowing at the wrong time and for the wrong purpose, preventing consumers from achieving financial stability.
An Urban Institute report titled, "Americans’ Debt Styles by Age and over Time" released recently found that 54.5 percent of those ages 18-22 are debt free, while 39.2 percent of those ages 23-27 are debt free. However, as borrowers age, that number drops drastically to 18.1 percent for the 63-67 age group, but rises for those over 77 at 36.1 percent.
"Consumers tend to borrow and consume less than predicted early in their lifetimes. Second, they also tend to consume more and save less than predicted in middle age, when they have their highest earnings; consequently they do not have enough savings to maintain their consumption levels in retirement," the report explained.
In 2014, mortgage debt was the third-highest form of debt among consumers, with 28 percent holding some form of housing-related debt, the report showed. The highest percentage of consumers have mortgage debt in their late 30s through their early 60s. For borrowers with mortgages, debt balances averaged $160,000 in 2014, up from $150,000 in 2010.
"These debt patterns reflect lifestyle changes as consumers get older: they finish their higher education and largely pay off the associated debt in their 20s and 30s, finance and become auto and homeowners in their 30s through their 60s, and accumulate enough equity on their homes to finance other spending against that equity in their late 40s through late 60s," the report said.
The Urban Institute research showed that those without debt tend to have lower Vantage scores within each age group. The 39.2 percent of 23–27-year-olds with no debt have a median Vantage score of 524, compared to 669 for those who have debt. For older consumers age 77 and over, the median Vantage score is 675, compared to 805 for consumers with debt. The median Vantage score for consumers 30 or younger is no more than 650; but it is more than 780 for consumers 68 or older.
"This suggests that those who have no debt have not built the credit history necessary to obtain debt, rather than the alternative, that they have no need for debt," the report stated. "Across age groups, younger consumers tend to have much lower credit scores than older consumers."
Click here to view the full report.