One In Seven Creditworthy Americans Can't Pay Bills, Study Shows

In the wake of the worst financial crisis since the Great Depression -- and a spike in the unemployment rate in November -- one in seven creditworthy Americans weren't able to pay their bills, a new study shows.

As job losses and pay cuts took their toll, a staggering number of Americans who had never before had serious trouble paying their bills had a "negative credit experience," according to a new survey from Deloitte. These "first-time defaulters" were a full 11 percent of the population, the survey suggests.

One in seven people who had never before seen this kind of credit trouble ended up defaulting, the study showed.

The survey doesn't reflect irresponsible borrowers taking on more debt than they could pay, or even greedy banks offering predatory loans with outrageous interest rates. Instead, the data suggest many creditworthy Americans, most with credit scores above 620, are unable to make basic payments, such as credit card and medical bills.

As unemployment hovered around 10 percent after the financial crisis, Americans who had previously been in fine financial shape suddenly found themselves pinched. About half of the first-time defaulters blamed their newfound troubles on reduced income, and 38 percent said they now didn't have a job at all.

These responsible Americans now had trouble paying ordinary, everyday bills. Of the first-time defaulters, 43 percent couldn't pay their medical bills. Almost a third were more than 30 days late on a credit card bill -- at least three times. 14 percent had trouble paying their taxes.

More than a fourth of these first-time defaulters ran into trouble with bank loans. Of those, more than half had issues with a mortgage.

Although positive signs of an economic recovery are emerging, the picture for many remains bleak. Unemployment benefits for about two million Americans -- many of whom lost their jobs through no fault of their own -- expired this week, as some will now be struggling to stay warm through the winter.

Read highlights of the study here.

Comments

[AyeChart]

09:48 AM on 12/06/2010

1) Is that supposed to be an oxymoron? A "creditworthy" person "can't pay bills?" Isn't that the definition of being NON-creditworthy? 2) Or is it to illustrate how crazy the definition of "creditworthy" has become in the age of congressional mandates to force lenders to make unwise loans? 3) Or is it just that the entire national media has gone crazy?

[lcr999]

12:56 PM on 12/05/2010

The headline is blatently false.

If they can't pay their bills, they are BY DEFINITION not creditworthy.

[Rickerman]

12:24 PM on 12/05/2010

"The day the people realize they can vote money, will be the day their Repiblic dies."

"We have given them a Republic, let's see if they can keep it."

Benjamin Franklin

[AyeChart]

09:48 AM on 12/06/2010

We've been failing at preserving the Republic the past 5-6 decades. Time to boot out the progressives and get back to reality-based government.

[Wupta]

11:43 AM on 12/06/2010

Our failing Republic has nothing to do with Progressives. It has everything to do with the manipulation of the government by special business interest who's buddies have been both the Republicans and the Democrats.

[young man]

01:58 AM on 12/05/2010

Does that mean they weren't credit worthy to start with...

[wdw505]

03:49 AM on 12/05/2010

yes, it does

[TheCarCzarsPage]

05:05 PM on 12/04/2010

I this the beginning of the end?

[BPCentrisAmerican]

04:48 PM on 12/04/2010

I don't have a high mortgage problem, I didn't buy more house than I needed and I didn't buy in the most expensive town my state. Since Bush started his neo-con blood feud with Iraq, state's got back less money, No Child Left behind an unfunded mandate, drove up property taxes, which drove up my mortgage by almost $500 since 2001. When the price of gas and heating oil rose 400%, utilities and anything shipped by truck became more expensive. The Bush Tax cuts for the average income earner was completely erased and than some in less than 7 years by high cost of living due to 8 years of constant war, which is sucking hundreds of billions out of the economy and therefore out our pockets. It's pointless to discuss tax rates and the economy unless the current wars are brought to an end, bankrupting the country to capture a handful of terrorist is lunacy beyond all belief. Bin Ladin has already won his war against the US, nation building in Afghanistan and defeating the Tailbone was never the reason for going into Afghanistan, and the reason we did wasn't accomplished, Bin Ladin will die before we catch him if he's not dead already. Both parties in Washington are living in a Belt Way Disney World the Republicans more so, Bohner called the vote on middle class tax cuts chicken crap when less than 99% of his own district earn less 200K a year.

[AyeChart]

09:49 AM on 12/06/2010

You illustrate quite well how the country gets into such trouble. No grasp of reality by politicians or voters.

[Wupta]

11:51 AM on 12/06/2010

Correctomundo!!

We also have to add that along with this our economy was diverted from making things to making paper profits by the Bankers and Wall Street. Not to mention the rampant rape of all segments of our lives, from healthcare that is through the roof, to education costs that are now ridiculous, insurance for this insurance for that, government regulation on the granular level that stifles nascent business before they have even produced a single acorn. Globalization, de-regulation, privatization blah blah blah.

[Peter Combs]

01:54 PM on 12/04/2010

Credit Worthy with a Score of 620? ...are you kidding....he should have said Marginally Credit worthy....

Being well off might make people dislike you, but you can pay your bills despite other people's envy..

[BPCentrisAmerican]

03:47 PM on 12/04/2010

Being well off might make people dislike you, but you can pay your bills despite other people's envy.

Really, why don;t you nitwits ever get it, are you really that lacking in empathy?

[Cleo Creech]

09:42 PM on 12/04/2010

You also have to realize that unless you're independently wealthy or retired, everyone in the U.S. is just one corporate restructuring, office closing, layoff away from losing their credit worthiness.

[noob1]

12:19 PM on 12/04/2010

Its funny how the banks get the bailouts eh? Funny stuff.

[29bela]

12:21 AM on 12/05/2010

Very well organized plan it is... and it is working for them beautifully. We still have our heads in the sand.
We are sleeping beauties, all of us except Assagne. O, well!

[sbrannon]

11:25 AM on 12/04/2010

We need to take the power of the banks from controlling the government. They are the primary money system, which is causing hunger and poverty worldwide. We need to get back to the greenback monetary system as in 1872 and rid of our national debt with is caused because of the interest. Then the banks, will not charge exorbitant rates for loans and credit cards to the people, because getting to our original monetary system will create a true competition between the banks and force them to behave themselves from robing the American people.

It is the banks, not the government, repbs or dems....but the government needs to open their eyes to the true and real reason for this crisis. And so do we, by reading our history books.

[29bela]

12:30 AM on 12/05/2010

It is cancer with metastasis all over the body, you know how to get rid of that? Destroy it with radiation, chemicals and cut of from healthy part of the body. And maybe it will help.

[Wupta]

11:55 AM on 12/06/2010

Bravo!!

[Pamela Grundy]

11:06 AM on 12/04/2010

This article makes my head hurt.

1) 'Creditworthy' individuals who can't pay their monthly bills? A group of people that banks have decided are 'worthy' of paying 30% interest, can't. Good! Pay back the principle when you can, never agree to such terms again. Sounds like this is more a problem for the banks than the customers.

2) Before credit cards were invented in the 1950s, the idea that people were either 'worthy' or 'unworthy' based on their access to credit was anathema. People coming out of the Great Depression had a justified distrust of buying anything on credit. All people were worthy, and most of them avoided credit like the plague. Basically, the banking industry had to wait for those Depression Era survivors to get old or die so they could sell credit to their kids--who didn't remember the dangers up close and personal the way their parents did.

3) Why is 'moral hazard' as a concept applied with a sledgehammer to working people--who BTW haven't seen a significant pay increase in 30 years--but almost ignored for corporations, banks, CEOs, and the obscenely rich, who have all seen their incomes increase exponentially over the same period? Shouldn't it be the other way around?

4) Wouldn't some of these obscenely wealthy people feel better about themselves if they worked for a living? You know, get off the investment/inheritance dole--apply for one of those great Xmas retail jobs. Hire the rich. Buy the t-shirt.

[Peter Combs]

01:56 PM on 12/04/2010

Last time I checked...VISA and Master Card dont send a man with a guy make you take a card...COnsumers get them, because they want what they want when they want it...and pay it later kinda like the GOverment...they are our example after all...

[BPCentrisAmerican]

04:02 PM on 12/04/2010

Last time I checked...30 years of supply side economic is a complete failure.

[29bela]

12:36 AM on 12/05/2010

You should ask why is it possible and why there are no other alternatives for taxpayers who have to pull banks from their trubles anyways. You would see how quick they will do decent business deals if you and others start finally ask this questions,but nobody does so far, all seem to be happy with 30%, so happy to become begars..

[dadw5boys]

03:10 AM on 12/05/2010

You would ask the WHOLE BUSH FAMILY to get off the Tax Payers back ????

[spinotter11]

10:33 AM on 12/04/2010

I don't understand how people can blame the lenders for their own inability to pay back what they owe. You are the ones who took out the loans, you are responsible for paying them back. It's not anyone else's problem.

[FreedomFreedomFreedom]

11:15 AM on 12/04/2010

Your compassionate eyes failed to read that 43% couldn't pay their medical bills. I know, it's their own fault for getting sick. How do you pay for your sickness? Conservatism is an illness. Seek treatment.

[sbrannon]

11:28 AM on 12/04/2010

I think the point being that because of the job cuts, salary freezes etc...people do not make enough money to supply their basic needs, therefore they fall on the use of their credit cards...to buy food for example...and gas...at high interest rates.

Once we have interest, it is a nightmare to pay back the debt. Our example? The Federal government.

[1johnf]

12:03 PM on 12/04/2010

Does the phrase usury mean anything today??? Credit card companies charging 30% for 2% money...I thought that was called loan sharking?

[BPCentrisAmerican]

04:04 PM on 12/04/2010

It is.

[hismuse]

07:44 AM on 12/04/2010

Trying to decide if we should pay the mortgage or the electricity next month...decisions...

[sbrannon]

11:29 AM on 12/04/2010

I guess its time to live in multi-family homes! Then we can all afford a vacation!

[1johnf]

12:04 PM on 12/04/2010

Or you might instead quote, "Are there no workhouses?"

[hismuse]

12:26 PM on 12/05/2010

wait, what is this vacation thing you speak of? it sounds familliar.

[isee61]

02:39 AM on 12/04/2010

My husband and I decided 3 1/2 years ago to become debt free using the Dave Ramsey plan (daveramsey.com) and we paid off our last debt in July 2010. In Sept. 2010 my husband got laid off due to lack of work in the construction industry, but we are still making it on my income and his UI benefit is all being put in the bank to weather this storm.

No more borrowing for us and to hell with a credit score, it really doesn't reflect on the present or future worthiness, but on past behavior.

[rhymney]

02:50 AM on 12/04/2010

Great post.

[wizbang fl]

06:49 AM on 12/04/2010

Wow! That's some timely planning. But a lesson we all should learn.

[Mountain Momma]

12:42 AM on 12/04/2010

My mortgage, car note, and insurance are the bills I make sure to pay. Everything else is negotiable. Sometimes things get paid on time, sometimes late. I never thought we'd find ourselves in this kind of situation, but I figure if I can just keep our heads above water, eventually we'll come out on top. I hope.

[Taymullah]

01:52 AM on 12/04/2010

Thats awesome...

My insurance lapsed, my proof say's it is good until Feb 2011 - But I'm month to month.. Lets hope that is good enough.

I can barely afford gas.. Oh wait.. I cant afford gas, as such my practical ability to go into town (no bus routes here i'm afraid) is limited, thats ok.. Everything is online anyways.. Oh wait.. I've been in school 3 years and not working, immediately disqualified. Lets forget the fact that in person I can really sell myself vs what some stupid online application ask?

What happened to going into a place of business, big or small. Handing the manager your resume and getting a job based on your ability to actually present yourself.

[woodnwire]

08:39 AM on 12/04/2010

with not much hope of finding work, it cost money to visit with each place of employment(gas,insurance) that a lot,don't have. most don't want a constant flow of job searchers in their business. some look at you like you have the plague ,ive actually had employers chuckle in dis-belief that i would inquire about a job. nice huh?

[sbrannon]

11:30 AM on 12/04/2010

I would do it anyway. Go door to door. Smile and Smile.

[sdmcmla]

10:14 PM on 12/03/2010

The problem with the Republican plan to make President Obama's administration a failure is that the whole country has to fail to make Obama a failure.  That sucks.