The Federal Reserve Bank of New York has released a report titled, "The State of Low-Income America: Credit Access & Housing." This third installment in a series delves into the financial circumstances of low-income households, with a particular focus on their ability to access and maintain credit, the burden of rent, and mortgage refinancing.
According to a press release issued by the Federal Reserve Bank of New York, the report reveals that only 59% of low-income individuals possess credit cards. However, many have begun to fall behind on their payments, as well as on their auto loan payments—a trend that commenced in 2022 and has persisted through the third quarter of 2023. Despite this, median credit card balances have risen for all income groups since the onset of the COVID-19 pandemic.
The press release further states that the report indicates that 24% of homeowners in low-income areas refinanced their mortgages in 2020 and 2021—when interest rates were at a low—compared to 42% of homeowners in high-income areas. Moreover, among those who rent, 57% of households in low-income areas spend more than 30% of their income on rent (termed as 'rent-burdened'), contrasting with 44% of households in high-income areas.
As per the press release, the authors compiled data from the New York Fed Consumer Credit Panel for this report. This panel utilizes anonymized Equifax credit report data. To determine borrowers' incomes, they merged Equifax location data with income data sourced from the 2016 Census Bureau American Community Survey.
The press release also notes that two previous installments in this series were published in November 2020 and March 2022.