Bankruptcy Trends and Inflation’s Impact on Credit: Experts’ Insights on Current ...

IN A RECENT EQUIFAX MARKET PULSE WEBINAR, experts shared insights on consumer trends, including the economic health of the average American household, 2025 bankruptcy trend predictions, and the impact of inflation on credit scores.

• The economic health of average American households varies significantly, with a divide between those with assets and those without.

• Bankruptcy filings have increased since the pandemic but are still within pre-pandemic levels.

• Credit scores have remained stable overall, but there has been movement within the prime space due to the K-shaped economy.

• Inflation has not had a significant impact on consumer credit scores.

Equifax Advisor Jesse Hardin and President of Wescott Strategic Advisors Dr. Robert Wescott answered these audience-submitted questions on what changes the market could see as a result.

Q: Is the data ever looked at without the top 1% of the U.S. population to see how average households are doing?

Robert Wescott: That's a great question, because stock ownership is highly concentrated at the top. I think the top 10% of American households own around 93% of the stock market wealth, and the top 1% own about 16 trillion dollars of stock market wealth. So that's around 50 trillion, or about a third, of stock market wealth there. So, you are correct. It is highly concentrated, and it gets a little complicated to start separating by household, because clearly things are concentrated, and much of that stock market wealth had 20% returns this year. All of that is benefiting a small number of households. The whole thing kind of splits down to about the 40th percentile of households by income category. So if you're above the 40th percentile, that's in the mid $40,000 income range, you are, likely, somewhat okay. But if you're below that level, you are not and are, clearly, going to be feeling some pain. We call that the K curve. The K curve means that those who have the assets are doing great, and those who don't have the assets are not doing great. And that's clearly a part of the story right now. It probably fed into the election in November. 70% of households said the economy was not on the right track, and some of those people were not getting 20% on their stock market portfolios.

Q: What are some bankruptcy trends and predictions for fiscal year 2025?

Jesse Hardin: We've looked at some of the bankruptcy trends, both personal and commercial, and the trend seems to be that we saw really a downward progression in bank bankruptcy filings post-pandemic. This was likely the result of more savings and investments, but also some post-pandemic court and processing backlogs. Those bankruptcies have started to increase, but they have not really gone far beyond where we were pre-pandemic. So, I think we have seen the increase that we expected to see. But we're not seeing anything alarming beyond that trend.

Q: Has inflation had an impact on consumer credit scores? Are we seeing consumers overextended, or being more credit conscious?

Hardin: We have seen largely that credit scores have been stable overall. However, we have observed some movement within the prime space up to super prime and down to subprime as well. And that is a result of the K-shaped economy, a type of economic recovery where the impact of economic challenges is not uniform for everyone. Overall, I think we would say that the K-shape continues to matter. We continue to see that some consumers are doing really well, and they have assets. They have a strong presence in their credit file. Others are struggling. And so, you cannot really put a one-size-fits-all approach to the entire population.

The monthly Equifax Market Pulse webinars feature economists, industry experts, and Equifax leaders covering a variety of topics in an hour-long, interactive session. The next webinar will take place on January 23 and will be focused on how to prospect to Gen Z, the audience that is at or near the start of their credit journey either as a consumer or as a business owner.