CHARLOTTE, N.C. — A new report from VantageScore is breaking down how people borrow money.
“The tale of two consumers is becoming more pronounced,” Susan Fahy, VantageScore's executive vice president and chief digital officer, said in a news release. “This trend could complicate the Federal Reserve’s efforts to effectively engineer a smooth landing because VantageScore Superprime consumers are still spending and borrowing while VantageScore Subprime consumers are finding it increasingly difficult to stay current on credit payments.”
The online magazine Money broke the report down even further. It says the good news is overall balances went down, and people are taking out fewer new lines of credit for things like cars, mortgages and personal loans.
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Alternatively, there's been an increase in those "subprime" borrowers, which refers to people who have credit scores in the 300 to 600 range. According to the report, just over 1 million people just dropped from an average credit score to subprime.
When looking at the reason behind the drop, the causes indicate where that "tale of two consumers" comes in.
People who had high credit scores before interest rates spiked are still keeping up with payments and borrowing money, but those who were in the average range -- between 661 and 780 -- are the group that's falling.
These number go beyond loans and approval ratings, and can have a real impact.
Money added that internet and phone plans, security deposits, and even rent payments can increase, all because of a low credit score. Plus, more bosses are starting to consider credit in hiring decisions.
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