Credit Karma’s State of Credit and Debt Report

Stylized woman considers the state of her credit and debt Image: Stylized woman considers the state of her credit and debt

In a Nutshell

Credit Karma members on average had 8% more overall debt in May 2020 than they had in May 2019 — but credit scores overall held steady in the “good” range year over year, and the number of accounts past-due 30 days or more dropped.

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Data and analysis from Yowana Wamala

Credit Karma members on average had 8% more total overall debt in May 2020 than they had in May 2019, while their average VantageScore 3.0 credit scores held steady year over year.

That’s the main takeaway from Credit Karma’s first State of Credit and Debt Report, which provides analysis of debt and credit trends based on data from millions of Credit Karma member accounts. (Learn more about our methodology.)

In this first edition of the report, we looked at data from May 2019 and May 2020 to determine year-over-year changes across Credit Karma membership related to overall debt, VantageScore 3.0® credit scores, status of accounts and demand for credit.

Read on for more, including data and analysis by generation and geography.


Credit Karma stat snapshot

Debt spotlight

Credit scores

Payments

Credit demand

Improving credit health


Credit Karma stat snapshot

Among Credit Karma members …

Overall

Average total debt rose 8% year over year, going from $69,067 on average in May 2019 to $74,624 in May 2020.

Credit card debt averaged $5,953 in May 2020, up 1% from May 2019.

The average VantageScore 3.0 credit score was 742 in May this year, up 5 points from May 2019.

There were fewer past-due accounts on average in May 2020 compared with May 2019.

There were fewer inquiries on average in May 2020 compared with May 2019.

Generations

Gen Z had the least credit card debt and baby boomers had the most as of May 2020.

Gen X had the highest average monthly auto payment ($445 per month) as of May 2020, along with the highest average mortgage debt and the most student loan debt.

The greatest and silent generations had the highest average VantageScore 3.0 scores — 781 and 817 respectively (both within the “excellent” range) — in May 2020.

Baby boomers, Gen Xers and millennials have made progress on past-due accounts since May 2019, going from two past-due accounts on average to one as of May 2020.

Gen Z and the silent generation had an average of two accounts in collections in May 2020, while other generations had an average of three.

Geography

States with the highest increase in average total overall debt in 2020 were Washington and Utah (8%). The lowest were Connecticut and Rhode Island (2%).

Washington state had the highest average VantageScore 3.0 credit score at 736. Southern states had the lowest average credit scores, though they still fell in the “good” range. For example, Mississippi’s average credit score was the lowest at 679.

Midwest cities tended to have less credit card debt among Credit Karma members, while cities in the South had some of the most.


Debt

In May 2020, average total overall debt among Credit Karma members was $74,624. That’s an 8% increase from May 2019, when average total debt was $69,067.

The chart below shows the percentage increase in members’ average total overall debt across states in the past year. States with the highest debt increases — led by Washington and Utah (both 8%) — are shaded darkest.

States with the least increase in debt were Rhode Island and Connecticut (both 2%).

Credit card debt

Average total credit card debt among Credit Karma members was up 1% year over year in May 2020.

 

May 2019

May 2020

Average credit card debt

$5,891

$5,953

  • Credit Karma members in Midwestern cities tended to have lower credit card debt, while cities in the South had some of the highest, our data showed.
  • Credit Karma’s Gen Z members had the least credit card debt as of May 2020. Baby boomers had the most, with Gen X not far behind.

Average credit card debt by generation, May 2020

Generation

Average credit card debt

Gen Z

$1,631

Millennial

$4,812

Gen X

$7,799

Baby boomer

$8,421

Silent

$7,492

Greatest

$5,565

Based on Credit Karma members with credit card debt in May 2020

Auto loan debt

Average total auto loan debt was up about 2% among Credit Karma members in May 2020 compared with May last year.

 

May 2019

May 2020

Average auto loan debt

$18,698

$19,101

  • Auto loan debt is highest for those with good credit scores. Our analysis found that Credit Karma members with average VantageScore 3.0 credit scores from 720 to 759, which are considered within the good score range, carried the highest average auto loan debt at $22,282 in May 2020.
  • Gen Xers had the highest average monthly auto payment. Gen X members were paying $445 per month on average for their auto loans in May this year. Gen Z had the lowest average monthly auto loan payment at $349.

Mortgage debt

Average mortgage debt among Credit Karma members was almost 5% higher in May 2020 than in May 2019.

 

May 2019

May 2020

Average mortgage debt

$178,824

$187,665

  • Credit Karma members in California had the highest monthly mortgage payments in May. Six of the 10 cities with the highest average monthly mortgage payments in May 2020 were in California.
  • Gen X had the highest average mortgage debt. The average open mortgage debt for Gen X members in May this year was $210,712. Gen Z members had the lowest average mortgage debt at $162,000 — a 30% difference.

Student loan debt

Average total student loan debt among Credit Karma members was up 7% in May this year from May 2019. Keep in mind that from March 13 through Sept. 30, 2020, the interest rate for federally owned loans is set to 0%, and mandatory payments for these loans are suspended. Privately owned student loan lenders are not required to suspend the accrual of interest or the collection of payments. The data below reflects debt reported to TransUnion as student loan debt, and it may include data for both private and federal student loans.

 

May 2019

May 2020

Average student loan debt

$35,296

$37,913

  • Gen X had the most student loan debt. Our data shows that Gen X members had more than three times as much student loan debt on average as Gen Z members in May 2020.

Average student loan debt for Credit Karma members by generation, May 2020

Generation

Average student loan debt

Gen Z

$14,840

Millennial

$36,946

Gen X

$49,144

Baby boomer

$47,891

Silent

$38,104

Greatest

$40,553

  • Average monthly student loan payments were higher for Credit Karma members in the Northeast and lower in the South. The average monthly student loan payment was about twice as much in New Hampshire (about $49) as it was in Alabama (about $24).

Credit scores

The average VantageScore 3.0 credit score for Credit Karma members in May 2020 was about 742 — five points higher than in May 2019. VantageScore 3.0 considers credit scores between 661 and 780 to be in the “good” range.

 

May 2019

May 2020

Average VantageScore 3.0 score

737

742

  • Not all generations had credit scores in the same range. While most Credit Karma member generations fall squarely within the “good” range of credit scoring, members of the greatest and silent generations had average VantageScore 3.0 scores of 781 and 817, respectively — both within the “excellent” range.
  • Members in southern states had the lowest average VantageScore 3.0 credit scores. The 10 states with the lowest average VantageScore 3.0 credit scores in May were all in the South, though all still fell within the “good” range for credit scores. The lowest average VantageScore 3.0 score in May was among members living in Mississippi, at 679. The highest average credit score was in Washington state, at 736.

Payments

On average, Credit Karma members across the U.S. have a record of making on-time payments 98% of the time as of May 2020.

Zeroing in on data for different states, the lowest on-time payment rates were among members in Louisiana and Mississippi (represented by the lightest shades in the chart) — at 95%, on average.

Past-due accounts

The average number of past-due accounts for Credit Karma members was down slightly in May 2020 compared with a year earlier. However, on average all Credit Karma member accounts had at least one past-due account.

 

May 2019

May 2020

Average past-due accounts

1.5

1

  • Some generations have made progress on past-due accounts. Our data shows that every generation of Credit Karma members had on average at least one past-due account in May 2020. But baby boomers, Gen Xers and millennials have made progress since May 2019, when Credit Karma members in these generations averaged two past-due accounts.

Open collections

The average number of accounts in collections recorded on Credit Karma member credit reports was slightly lower in May 2020 compared with last year.

 

May 2019

May 2020

Average open collections accounts

2.83

2.67

  • Some generations had fewer accounts in collections on average compared with other generations. Gen Z members and members of the silent generation have an average of two accounts in collections, while other generations had an average of three accounts in collections.

Average number of open collections accounts for Credit Karma members as of May 2020

VantageScore 3.0 score band

Average number of open collections

Thin file

3

300–599

4

600–659

3

660–719

2

720–759

2

760–850

2


Credit demand

The number of average credit inquiries across all Credit Karma members was down slightly in May 2020 compared with a year earlier, reflecting slightly less demand for credit year over year.

 

May 2019

May 2020

Average total inquiries

5

4.83

  • Gen X Credit Karma members had the most credit inquiries on average, with six — while members of the silent and greatest generations had four inquiries on average.
  • The number of inquiries also varied by city. San Francisco-based Credit Karma members had an average of three inquiries on their reports as of May this year, well below the average of five. On the other hand, Credit Karma members had an average of eight inquiries in Milwaukee, St. Louis and Laredo, Texas.

Tips for improving credit health

Anyone can improve their credit if they get up to speed on how it works — and then use it carefully and strategically. Here are some tips.

Understand what factors affect your credit scores

Your payment history, or how often you make on-time payments, is the most important factor that goes into determining your credit scores. That’s why it’s so important to pay at least the minimum balance on your bills each month.

Your scores are also affected by factors like credit utilization (how much of your available credit you actually use), your credit history and more. If you have an account in collections or an overdue account, you’re not alone — and it can impact your credit scores.

What factors affect your credit scores?

Understand how to use good credit to your advantage

Typically, when you have a better credit profile, you can often qualify to borrow the money you need — and at a lower cost — than you would with credit that’s not as strong.

For example, Credit Karma members with good credit scores in May this year had the most auto loan debt. This could be because they were able to borrow enough to afford the vehicles they wanted.

Borrow only what’s necessary

Taking on extra debt that you don’t pay off right away may cause credit scores to decline, since utilization is a key factor in credit scores. It’s generally considered a good rule to make sure you’re using less than 30% of the total credit you’re borrowing.

Although Credit Karma member debt overall was up 8% from May 2019 to May 2020, credit scores also held steady among members. One reason could be that credit utilization ratios weren’t dramatically affected.

Credit Karma Guide to Debt

Be picky about the kind of debt you do take on

Some types of debt are considered better than others. Mortgages or student loans may cost more upfront but are considered to be good debt because they could lead to longer-term financial gains.

Credit card debt may not be as costly upfront, but it doesn’t leave you with appreciating assets — so it’s considered bad debt.

Keeping your “bad debt” as low as possible can help strengthen your credit profile.


Methodology

To determine averages across overall debt (including but not limited to credit card, mortgage, personal loan, student loan and auto loan debt), credit scores, payment and credit-seeking trends in May 2020, we analyzed the accounts of about 89 million U.S. Credit Karma members in aggregate. All aggregate data analyzed came from members’ TransUnion credit reports.

For the purposes of this analysis, card debt is defined as any unpaid balances existing on members’ credit cards in aggregate at the time the data was pulled. We also looked at aggregate data of more than 22 million U.S. members with ZIP codes in the top 100 most populated U.S. metro areas to see trends by city. All numbers in this report were rounded to the nearest whole.