Unexpected Expenses: It Doesn’t Take Much to Put Nonprime Americans into Financial Crisis

New research from Elevate’s Center for the New Middle Class shows
just how easily and how often surprises can risk consumers’ financial
health

FORT WORTH, Texas–(BUSINESS WIRE)–Unexpected expenses are more likely to hit nonprime Americans much
sooner and harder than their counterparts with prime credit scores,
according to research released today by Elevate’s Center for the New
Middle Class. For example, the research shows that the 160 million
Americans who are nonprime, can only weather an unexpected expense of 31
percent of their monthly income, as opposed to 53 percent for their
prime counterparts.

The Center’s latest study explores the impact of unexpected expenses on
nonprime Americans, defined as those who have credit scores below 700.
Key findings include:

• A bill becomes a crisis for nonprime Americans at $1,400; for prime,
  it’s $2,900
• Many common expenses such as a vehicle transmission, broken arm, or
  apartment security deposit are above the $1,400 threshold for nonprime
  Americans, but below the $2,900 threshold for prime Americans
• Almost half of nonprime Americans have more than three disrupting
  expense events per year compared to approximately one-quarter of primes
• Nonprime Americans can survive only half as long as prime Americans
  after a drop in income
• Half of nonprime Americans have an income that fluctuates
  month-to-month

Additionally, based on geographic location, purchasing power can create
large disparities in threshold amounts. For example, local purchasing
power adjusted for $100 in Tulsa, OK, acts more like $131 in Kansas
City, MO, and a mere $77 in New York, NY.

“Much has been made of the surprising statistic from the Federal Reserve
that almost half of Americans can’t come up with $400 without borrowing
money or selling something. We wanted to understand the point at which
an unexpected expense becomes a crisis,” said Jonathan Walker, executive
director of Elevate’s Center for the New Middle Class. “This was one of
our most nuanced reports. The financial fragility of nonprime Americans
is not a simple problem. Deep understanding is required to find
solutions that will be constructive and sustainable.”

Walker continued, “It’s hard for many to believe that unexpected car
repairs can cause a major upset in a household’s finances.
Unfortunately, it happens all too often, simply because nonprime
Americans don’t have the available resources to help absorb some of
these financial shocks. This can cause a downward spiral on their daily
finances as well as their credit history.”

In its mission to engage and discuss the unique needs of nonprime
Americans, Elevate’s Center for the New Middle Class’s ongoing research
efforts reveal just how critical access to credit is, as well as the
ways in which this market can be financially savvier than prime
counterparts.

About the Research

The Center’s research compared the responses of 502 nonprime Americans
with 525 Americans with prime credit scores using interviews conducted
June 27-July 1, 2016. For more details on the study, click
here.

About Elevate’s Center for the New Middle Class

Elevate’s Center for the New Middle Class conducts research, engages in
dialogue, and builds cooperation to generate understanding of the
behaviors, attitudes, and challenges of America’s growing “New Middle
Class.” For more information, visit: http://www.elevate.com/NewMiddleClass

About Elevate

Elevate has originated more than $3 billion in nonprime credit to 1.4
million consumers to date. Its innovative online credit solutions
provide immediate relief to customers today and help them build a
brighter financial future. The company is committed to rewarding
borrowers’ good financial behavior with features like interest rates
that can go down over time, free financial training and free credit
monitoring. Elevate’s suite of groundbreaking credit products includes
RISE, Sunny and Elastic. The company is privately held and is backed by
respected Silicon Valley venture capital firms including Sequoia Capital
and Technology Crossover Ventures. For more information, visit: http://www.elevate.com/.

Contacts

Media Inquiries:
Vested
Ishviene Arora, 917-765-8720
elevate@fullyvested.com