By Chinonyerem Emmanuel
Americans are growing increasingly uneasy about their ability to keep up with debt payments, and the concern is now as widespread as it was at the height of the pandemic. New data from the Federal Reserve Bank of New York reveals that fear of falling behind on bills has surged to its highest level in nearly five years.
According to the New York Fed’s latest Survey of Consumer Expectations, the share of Americans who believe they may miss a minimum debt payment in the coming months has climbed to its highest point since April 2020. The findings suggest that household financial stress is intensifying just as economic uncertainty continues to linger.
The anxiety is not evenly distributed. The sharpest increases were seen among adults over age 60, individuals without a college degree, and households earning less than $50,000 annually.
The December survey polled roughly 1,300 households and paints a picture of growing vulnerability among groups already more exposed to financial shocks.
“It’s an uncertain time for many Americans,” said Matt Schulz, chief consumer finance analyst at LendingTree. As job growth slows and hiring becomes more competitive, many workers are increasingly uneasy about their employment prospects.
“People are nervous about their current jobs, worried it’ll take longer to find a new one, concerned that credit will be harder to access, and unsure whether they’ll be able to make all of their minimum debt payments in the months ahead,” Schulz explained.
That unease matters because even one slip-up can trigger long-lasting financial damage.
One missed payment, lasting consequences
Research from LendingTree shows that missing just a single payment can significantly harm a borrower’s credit profile. An analysis of 100,000 credit reports found that one missed payment lowers a credit score by an average of 80 points. Consumers with a missed payment had an average credit score of 553, a steep drop from borrowers with spotless payment histories. Credit scores typically range from 300 to 850.
“Paying your credit card bill even a few days late can cost you,” Schulz warned. Late fees can reach around $40 per incident, but the real damage often comes later in the form of higher borrowing costs and reduced access to credit.
Lower credit scores can result in smaller credit limits, higher interest rates on future loans, and fewer financing options overall. Simply put, the higher your credit score, the easier and cheaper it is to borrow money.
Ironically, borrowers with excellent credit often have the most to lose. “The bigger they are, the harder they fall,” said Ted Rossman, senior industry analyst at Bankrate. For someone with a near-perfect score, a single 30-day delinquency can erase 100 points or more.
For borrowers with already-lower credit scores, the impact may be less severe. “If you already have a few blemishes on your report, one more doesn’t sting quite as much,” Rossman noted. Still, repeated or prolonged delinquencies can compound the damage.
Experts also stress that the longer a payment goes unpaid, the worse the consequences become. A bill that’s 90 days overdue, known as late-stage delinquency, can severely undermine a borrower’s financial standing.
Speak up before you fall behind
If missing a payment seems likely, financial experts strongly advise contacting your lender before the due date.
“Ask for a break,” Rossman said. “Many lenders are willing to work with borrowers, whether that means pausing payments temporarily, lowering interest rates, or offering short-term relief.”
In some cases, proactively communicating with a lender can help borrowers avoid credit score damage altogether. “If you speak up early enough and get permission to pay less, or even skip a payment, you may be able to protect your credit,” Rossman added.
As household budgets tighten and uncertainty clouds the economic outlook, the data underscores a sobering reality: America’s debt stress is rising again, and for many families, the margin for error has grown dangerously thin.
Source: CNBC
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