Before the COVID-19 pandemic forced the closure of businesses and commerce across the United States, consumer confidence was reaching record levels.
According to Experian’s 2019 Consumer Debt Study, released in early March, the average FICO score in the United States hit a record high of 703 as more Americans kept an eye on their credit reports and credit scores. Lenders typically use the score to determine if a borrower will be able to pay off their debt.
At the same time, delinquency rates were at record lows, according to the report — proof that while consumers were spending, they were doing it responsibly by paying their debts off on time.
And, before the pandemic, incomes were growing at a rate that outpaced debt. Compared to 2009, as the Great Recession wound down, the debt-to-income ratio, which compares the amount of debt a person has to their income, was significantly lower.
Compared to just a couple months ago, the economy looks much different today. As millions lose their jobs because of the pandemic, consumer confidence dropped significantly in April and unemployment could hit 20% in June.
For baby boomers, the pandemic is presenting particular challenges. Not only are they at higher risk for health complications from COVID-19, they also are nearing retirement. A job loss or stock market dive may have long-term implications on their retirement years.
Experian’s debt study provides a look at how the generation was doing before the coronavirus began to spread around the world. And here’s a little good news: It wasn’t all bad, according to the report.
Baby boomers had an average credit card debt of $6,949 in 2019.
That’s less than Generation X, who have racked up an average of $8,215 in credit card debt, and more than millennials, who had $4,889. But, according to the report, millennials were spending more than baby boomers, which means the younger generation may catch up soon.
Baby boomers carried the highest average personal loan debt of any generation in 2019.
Personal loans are the fastest-growing kind of loan debt in the United States — faster than auto loans, credit cards, mortgages and student loan debt. Once considered a last resort, they’re used today to launch a home project, pay medical bills or fund other large purchases. And while the loans can help some consumers escape financial difficulties, they also come with some disadvantages, which can include high interest rates.
Compared to other generations, baby boomers hold the highest average personal loan debt — $19,253. For millennials, it’s $11,819 and for Generation X and the silent generation, it averages around $17,100.
Baby boomers had the second highest average student loan debt balance of $39,981.
Just 10% of Americans have student loans, but, together, those loans total more than $1.4 trillion in 2019, a 113% increase from 2009. Generation X has the highest average student loan balance at $39,981. Baby boomers, who might be paying off loans from a degree earned later in their career or for their child’s education, come in second at $34,957.
Baby boomers have an average mortgage balance of $175,865.
Overall, on the mortgage front, Experian’s debt study had some good news. While mortgage debt is the largest of all debt types among consumers, the number increased only modestly in the last decade. At the same time, mortgage delinquencies dropped by 79%.
With more years to pay off their mortgage or because they’ve downsized to a smaller home, baby boomers’ average mortgage balance comes in lower than Generation X, with $238,344, and millennials, with $224,500.
Generation X, baby boomers and millennials still carry the top average auto debt balances.
The majority of new and used cars are financed and, overall, more people are taking out car loans when they purchase a vehicle. Generation X holds the highest average auto loan balance at $21,570. Baby boomers come in at $18,759. Millennials follow with $18,201.
Before the pandemic, Americans, including baby boomers, were doing better than a decade ago — more likely to pay off their bills on time and make other smart decisions with their money. What happens next is uncertain as we all continue to grapple with the ramifications of an unprecedented crisis. But, according to the Experian report, those smarter decisions and new habits could bode well for personal finance security going forward.
If you are experiencing financial difficulty and are looking for a solution, CESI is here to help. Our counselors are available to assist if you are experiencing job loss, temporary loss of income or financial hardship during this time. Contact us today for a free financial assessment with one of our certified credit counselors.
Consumer Education Services, Inc. empowers people to overcome their financial challenges and lead financially-healthy lives.
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