There aren’t many good things to say about 2021, a year that began with a violent assault on the United States Capitol and ended with a further rise in COVID-19 cases, but there are had a glimmer of hope.
Over the past year in South Carolina and states across the country, many financially precarious people have been able to escape debt collection, pay off student loans, and improve their credit scores.
Some numbers are quite startling, including a drop of almost a third in delinquency on credit cards and student loans.
Now, it’s still not a pink picture. South Carolina is one of the worst states in the country in terms of residents with terrible credit and debt in collection. We compete for last place with Alabama, Louisiana, Mississippi and Arkansas.
The good news is that one of the highest annual job recoveries ever combined with federal relief payments and, in particular, the advance child tax credit, have helped many people see improvements. A continued interest-free pause in federal student loan payments has also helped.
For people with low incomes, several hundred or several thousand dollars unexpectedly can make all the difference in turning the tide. Consider that for people facing debt collectors, the median amount owed is $ 2,097 in South Carolina and $ 1,839 nationally.
Last year, individuals received relief checks of $ 1,400 in March and monthly advance child tax credit payments for those who qualified from July through December.
A study by QuoteWizard, which is part of Lending Tree, looked at the impact using data from the Urban Institute to compare October to February. Here’s what they found:
- Student loan delinquency plunged by a third nationwide (to 10%) and fell 32% in South Carolina.
- Credit card delinquency has fallen 31 percent both nationally and in Palmetto State. (at 4 percent and 5 percent, respectively).
- The percentage of South Carolina residents with debts in collection has fallen to 40%. It’s a big improvement but still a horrible number. It is only in Louisiana that a higher percentage of the population is in debt collection.
- The percentage of South Carolina residents with risky credit scores (580 to 619) fell from 32% to 29%.
Of course, these numbers are averages. Many people suffered during the economy driven by the pandemic and are worse off than before, but the majority of those with debt and poor credit have seen their finances improve.
As has been widely reported, the wealthy have done extremely well in 2021 due to the boom in the US stock market which has fattened investment and retirement accounts. And many of those who are comfortably well off but perhaps not “rich” have received the same aid checks and the same child tax credit payments as those in low income.
The trick for many this year will be to maintain the improvements in their personal finances seen last year. Unless there is new legislation, there are no more relief checks outstanding and no additional early child tax credit payments (the remainder will be paid in 2022 through income tax refunds) is not expected.
Were you among the South Carolina residents who helped bring the averages down? Who ended the year with less debt and a better credit rating?
Going forward, the challenge is to capitalize on these improvements through goal-oriented financial discipline.
I’m not saying it will be easy. South Carolina is a state with a meager safety net, where Medicaid has not been extended, unemployment benefits are paltry, and housing costs continue to skyrocket. On the bright side, there has rarely been a better time to look for a better paying job.
Getting out of debt and struggling with subprime loans can be like rolling a big boulder over a hill. It’s difficult and it’s moving slowly, but there is hope as long as you keep moving steadily in the right direction.
