K-shaped economy is 'alive and well,' expert says — what new research shows
The U.S. economy is increasingly divided along creditworthiness lines, with more consumers falling into either the superprime or subprime categories, according to TransUnion. Higher-income households with strong credit are financially stable, while lower-income households face growing debt burdens and financial strain. Despite widespread inflation, lower-income consumers are disproportionately affected due to higher debt-to-income ratios and reliance on credit cards.
- ▪More borrowers are classified as either superprime (credit score 780+) or subprime (credit score below 600), indicating a bifurcated economy.
- ▪Superprime consumers are financially stable and tend to remain in that category over time.
- ▪Lower-income households are experiencing higher debt loads and rising debt-to-income ratios, signaling financial stress.
- ▪The average credit card balance per consumer has reached $6,519, a 2.3% increase from the previous year.
- ▪Inflation has affected all consumers, but lower-income groups are hit harder when debt levels are considered.
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Over the past several years, more borrowers have become either superprime, with a credit score of 780 or higher, or subprime, with a credit score below 600, according to TransUnion. The dynamic is creating an increasingly bifurcated consumer economy."The top end of the K is very strong," Raneri said. "Superprime is stable and resilient," she said. "When people get into that group, they don't flow in and out very much."On the bottom part of the K, lower-income households "are struggling more than they did," Raneri said. Consumers in this group are carrying higher debt loads with rising debt-to-income ratios, which are signs of potential financial strain, TransUnion found."Everyone has seen the effects of inflation somewhat equally — nobody escaped it," Raneri said.
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