U.S. Credit Score Statistics Report 2019
The Authorized User Effect: New Study Reveals Its Unbelievable Credit Score Impact
In April 2019, Credit Knocks conducted a nationwide survey of U.S. adults aged 20-29 to learn about their credit education, their awareness and use of "lesser-known" credit-building strategies such as the authorized user strategy, and how these correlated with their credit score.
Study Goals
The scope of the Credit Knocks survey widely aims to segment the credit scores of authorized users on credit cards against non-authorized users on credit cards among 20-29 year olds. We also segmented authorized users against adults of various income levels, ethnicities and education levels. The resulting report delivers insights into the incredible impact being an authorized user on a credit card has on credit scores. In most of our findings, being added as an authorized user had a more significant impact on credit scores than income, ethnicity, or education.
Study Contents Menu
Report: Authorized User Effect
American Credit Score Statistics
Report Key Findings
Authorized User Credit Statistics
How Does Being Added As An Authorized User Affect Credit Score?
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The "Authorized User Effect" explained in 30 seconds:
You can ask a family member, friend, or use a service to add you as an "authorized user" on their credit card. By doing so, the card holder's credit limit and long-standing payment history is adopted into your credit file. Your credit history does not impact the card holder's score in any way, and with this life hack, you don’t have to ever use or touch the credit card. In a matter of weeks, most new authorized users will see a substantial, positive increase in their own credit score.
When analyzing respondents' data further, Credit Knocks found a direct correlation with people who had been added as authorized users and good credit scores. In addition, there appears to be a direct correlation between credit awareness of those individuals who were added as an authorized user and those that had not been added.
Of the respondents that had been added as an authorized user:
Out of our respondents aged 20-29, the data below illustrates how ethnicity plays a role as an indicator of young Americans' credit scores:
It has already been widely studied and reported that Black and Hispanic Americans' credit scores are disproportionately lower, on average, than White and Asian Americans' scores.
However:
The remarkable statistics that the survey uncovered was how this scoring data looked when segmented by respondents that had been added as an authorized user on someone else’s credit card.
As you can see above, White and Asian respondents had a higher credit rating overall. However, 52.4% of non-white or Asian individuals that have been added as an authorized user on a credit card had a credit rating of 680 or more. Comparing this to white and Asians who had not used the authorized user effect, only 30.5% of them had a credit score of 680 or above.
See below how being added on someone’s card with a good credit rating can tip the pre-defined race averages vastly in the other direction.
Out of our respondents aged 20-29, the data below illustrates how education plays a role as an indicator of young Americans' credit scores:
As you can see from the data above, education proved to be a leading indicator of someone’s credit score in our study. From analyzing the data, 38.6% of all individuals who had a vocational, university, or post-graduate education had a credit score of 680 or higher. However, this number dropped to 33.4% when the respondent had never heard of the authorized user strategy.
Where being added as an authorized user on someone’s credit card made the most significant impact was with individuals whose highest attained education was high school. Only 19.3% of them had a credit score of 680+. However, as you can see below, these figures shifted dramatically to 36.0% for individuals that got added on someone’s card.
Out of our respondents aged 20-29, the data below illustrates how income plays a role as an indicator of young Americans' credit scores:
It’s commonly known that, where income is not directly used as a component of your credit score calculation, it is a leading indicator as you can see from the data above. Typically, income is only used by lenders as a ratio to work out if you can afford to pay back the debt.
Again, the authorized user effect was shown to trump income level effects in our study as well. Overall, for individuals who earned $49,999 or less, only 24.6% of them had a credit score of 680+. When we compare this to people from the same income-level group who got added as an authorized user, 52.6% of them had a credit score of 680+.
Credit Knocks also surveyed our respondents regarding their knowledge of the authorized user effect and whether they had implemented it. Over a third wanted to use it but either didn’t know anyone to ask or were turned away by friends or family – all of which were unaware of services they could have used to be added to a card or tradeline, showing a large void in consumer awareness.
Note: The 39.5% that got turned down or had no one to ask were unaware some services could help if their friends or family have bad credit history too.
When asking individuals if there were aware that they could pay to be added to a card as an authorized user, 82.46% of respondents had never heard of it. We have seen the authorized user effect providing sensational boosts to credit scores in every demographic in this study. By raising the awareness and educating America’s youth about its incredible impact and availability to all through paid services, they can start unlocking the doors to better credit.
U.S. Credit Score Statistics 2019
American Credit Score Demographics (20-29 Years Old)
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In the U.S. the well-known credit score system is FICO, which ranges between 300 (being very poor) and 850 (being exceptional). Most scores in the U.S. would typically fall between 600 and 750 as an average - the higher the score, the more likely lenders will accept credit decisions as they know you’re more likely to repay your debt. This score is typically made up of credit utilization, credit mix, credit inquiries, payment history, and age of credit data.
Out of our respondents aged 20-29, here is the current credit score distribution:
In addition to the standard components that build up your credit score, lenders will also want to learn your income, which is not a direct component in credit scoring. Lenders will, however, use your income as validation in terms of denying applications based on a debt-to-income ratio. Below, we looked at how credit scores of Americans aged 20-29 correlated to their annual income.
Out of our respondents aged 20-29, this was the income-to-credit-score correlation:
U.S. Credit Education Statistics 2019
American Credit System Knowledge (20-29 Years Old)
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Credit Knocks asked respondents to rate their current knowledge of credit and the scoring system behind it. The report surprisingly uncovered that most young adults in American thought they had a solid understanding of credit. In fact, almost half of these respondents had low scores or no idea of their score – furthermore, they were unaware of the authorized user effect and their ability to utilize bills they’re currently paying to boost their scores.
Out of our respondents aged 20-29, people with a self-proclaimed ‘strong’ credit knowledge polled:
Credit Knocks asked respondents how they had acquired their current knowledge of credit. The report surprisingly uncovered that self-taught Americans had the highest credit scores, on average, compared to those who had received their credit education by other sources.
Out of our respondents aged 20-29, this was the credit score data by credit education source:
U.S. Credit Application Statistics 2019
Utilizing Existing Credit Lines to Boost Your Score
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It can be disappointing and frustrating at times to have credit denied by a lender. For almost half of our young adult respondents, this was a common occurrence. In fact, nearly half had been denied some form of credit application in the past 2 years. As we can see from the credit education data previously, many also have a poor understanding of credit.
Out of our respondents aged 20-29, below is the percentage of credit declines in the past 2 years:
With almost half of our respondents failing credit applications in the past 2 years and similar numbers having a poor understanding of credit, Credit Knocks wanted to highlight a door that could get opened for a considerable proportion of these young adults.
Below we can see that the majority of our young respondents had many active bills that were being paid on a regular basis. These people are, in most cases, navigating life with low credit scores that could receive an almost instant boost from reporting this data to credit bureaus using a variety of services.
Many of the services our respondents selected above are forms of rent or utility bills they pay regularly. Unfortunately, their bill payments (even if timely &consistent) have NO impact on their credit score because these bills are not generally reported to the bureaus. However, they can easily be reported to credit bureaus via services. Reporting of this additional data (known as "alternative data" in the credit space) could help the bureaus to get a better understanding of their reliability as a potential borrower. Half of our respondents that rented and 1 in 3 with a low credit score had no idea they can use this data to boost their credit score.
Report Methodology and Downloads
Data Source And Methods
Copyright Information
All the data included in this study is available via public domain. This means all statistics may be copied without permission, we do however appreciate citation as the source via a link.
