33% of Consumers Saw Credit Scores Decline After Unexpected Expense

Jan 11, 2024Financial Literacy, News

A recent report by PYMNTS Intelligence and Sezzle entitled “Credit Card Use During Economic Turbulence” found that roughly 60 percent of all consumers had an unexpected expense in the last year, averaging $5,500. Medical emergencies were the most prevalent unexpected expense, averaging $6,200, 13 percent more than the average unforeseen expense. 

Home repairs were the second most common unexpected expense, averaging around $6,000. These costly financial burdens have significantly affected consumers’ financial stability, especially among consumers who are already credit-marginalized. Gen Z consumers were substantially impacted, with 70 percent facing unplanned expenses that cost almost as much as their average savings of $3,400. 

The survey found that half of credit-marginalized consumers who were rejected for credit products at least once in the last 12 months began to rely on high-interest loans like pawnshop and payday loans to cover unforeseen expenses. These consumers were also more likely to utilize other financing options like buy now, pay later (BNPL) and credit cards. 

While these options can provide some short-term relief, the study showed that credit-marginalized consumers who faced unplanned expenses also dealt with further credit issues, including 33 percent who saw a decline in credit scores. 

The study also found that 22 percent of credit-marginalized consumers were limited to high-interest loans, and 24 percent faced overdraft fees because of their unexpected expenses. Additionally, 23 percent were charged non-sufficient fund fees and 26 percent reported missing payments. 

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