Meet the High Earners Who Can’t Get Credit

Access to credit may be the key factor determining whether consumer spending will continue to be resilient. Or not.

As detailed in the report “How Credit Insecurity is Changing U.S. Consumers’ Borrowing Habits,” done in collaboration between PYMNTS and Sezzle, that all-important access is key for many individuals. Particularly the relatively well-off households that might seemingly be a “shoo in” for traditional conduits of credit, especially cards.

In our report we established that a significant percentage of consumers are “credit marginalized.” That means that they’ve been rejected at least once when applying for credit products in the past 12 months.

Drilling down, we see that more “high earners” — those making more than $100,000 annually — are marginalized more than any other income bracket. Thirty-eight percent of higher earners fit within this designation, vs. 29% for consumers and households earning between $50,000 to $100,000 and roughly 33% of those earning less than $50,000 have been marginalized.

In a more generalized read across, 79% of credit marginalized consumers said they’d experienced a life event — illness, loss of a job, a death in the family — that had negatively impacted their credit. That would include the high earners, too. And, in other research, we’ve determined that nearly half of the $100,000+ earners reported living paycheck to paycheck.

Connecting the Dots

Even the wealthier households are facing the pressures of inflation and of meeting their monthly obligations. And they’re suffering the same financial setbacks as everyone else. And yet, the data show that they’re rejected for credit more often than other cohorts. In fact, Federal Reserve data show that a relatively smaller population of $100,000+ earners carried credit card balances than other brackets, at 38% (among consumers surveyed who have credit cards) vs. more than 50% for everyone else. It may be the case that lenders are looking at data such as the number of accounts opened or applied for, or the balances carried vs. card limits as red flags.

But the stats point to a greenfield opportunity for lenders to leverage account-level data to broaden credit access generally — and by extension to high earners. These consumers have been using credit in a reasonably responsible manner, and yet, when they’ve sought to tap new funding, as discussed above, have been denied.

As noted in the report earlier this month, “Credit Card Use During Economic Turbulence,” 24% of $100,000+ income households revolve their balances, which indicates that the majority do not, and pay down those balances as they accrue.

Forward thinking lenders — traditional banks among them and alternative credit providers that have been becoming more firmly entrenched in the buy now, pay later (BNPL) landscape — can parse the daily spending habits of consumers, and cash flow insight (via dependable paychecks) in order to determine creditworthiness. About 59% of more than 350 financial institutions (FIs) and FinTech executives PYMNTS and Banyan queried earlier this year said that integrating that account level and receipt level data boosts customer engagement. The FIs had at least $5 billion in assets and the FinTechs at least 1 million active monthly users, which gives the nod to new avenues of analyzing, and offering, credit, in a personalized manner that cements loyalty and is fine-tuned to an individual’s circumstances.