A recent PYMNTS study reveals that helping consumers boost their credit scores, especially those with low scores, can lead to significant financial benefits.
08/16/2023 9:10 A.M.
2 minute read
A recent study from PYMNTS reveals that a concerning number of individuals, particularly those with low credit scores, lack the knowledge to enhance their credit standing. The study, a collaborative effort between PYMNTS and Sezzle, dives into the multifaceted impact of buy now, pay later (BNPL) options on consumer credit accessibility and profiles.
PYMNTS’ analysis, conducted through a survey of 3,177 American consumers, sheds light on the significance of credit scores in financial stability. Surprisingly, 27% of surveyed individuals possess credit scores of 650 or less, which fall within the bracket of low scores, while 14% grapple with deep subprime scores of 579 or lower. These low credit scores amplify financial challenges, leaving affected individuals twice as likely to face detrimental financial setbacks compared to the average consumer, according to the study.
The report suggests that improvements in credit scores could alleviate these financial struggles and open doors to elevated living standards. For instance, those categorized as deep subprime consumers could potentially expand their borrowing capacity by 68% of their income by raising their credit scores to near prime levels. This transition could enable them to finance an additional $44,000 worth of purchases, illustrating the transformative power of enhanced credit scores.
When it comes to boosting credit scores, consumers are actively seeking solutions. The study finds that credit builder apps and BNPL options are popular choices for individuals striving to uplift their creditworthiness. In fact, 29% of consumers with credit scores of 650 or lower have used credit-builder apps in the past year, with 17% of them primarily using these apps for credit-building purposes. Moreover, individuals with lower scores exhibit a greater propensity to use BNPL loans, recognizing their potential to bolster credit profiles without affecting credit reports.
Notably, the study identifies a compelling link between dissatisfaction with one’s credit score and the determination to improve it. The majority of consumers with credit scores of 650 or less express discontentment with their scores, fueling their eagerness to embark on the journey of credit enhancement.
However, a crucial revelation is that despite the desire for improvement, a significant knowledge gap exists. This gap is a challenge that the financial services industry must address in order to effectively cater to the needs of credit-insecure consumers, according to the study.
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