Job Loss, Medical Bills Are Leading Causes of Credit Score Drops
According to new research from Elevate’s Center for the New Middle Class, work-related struggles were the most common reason for credit score declines. Over half (55%) of the respondents said their credit scores dropped below 700 after a job loss or reduction in work hours.
Medical bills were also cited as a source of struggle. When participants were asked for personal stories about their credit score declines, 26% were medical related. A 2017 study from Elevate showed that 70% of non-prime credit score holders (below 700) could not cover $500 in emergency medical bills with their savings.
The researchers found most non-prime participants had multiple factors that contributed to their credit score issues. Of the people who mentioned medical bills affecting their credit scores, 73% also experienced a loss of income. In total, non-prime consumers were 86% more likely to have a score drop because of multiple factors, as opposed to only one.
As a result of damaged credit, 24% had to tap into their savings to cover their bills, 13% had to file bankruptcy, and 11% got a divorce. Of the non-prime consumers, 43% said they used a credit card to cover their debt/expenses.
Despite the reasons for credit damage, 48% of participants said they had seen an increase in their credit score over the last 12 months. Nearly one quarter (23%) had seen no change at all, and 23% saw a further decrease in their scores.