Rising credit card debt in the U.S. has reached an unprecedented $1.2 trillion, affecting consumers’ financial stability. Economic challenges, including inflation and trade policies, have led to a slowdown in credit growth, prompting many households to reassess their spending. As more individuals live paycheck to paycheck, access to credit remains a pressing issue, especially for those outside traditional financial systems. Companies like OppFi and financial solutions such as buy now, pay later services have emerged to address gaps in credit availability.
Past reports indicate that a significant portion of the U.S. population has struggled with credit access for years. While overall consumer debt has grown steadily, financial institutions have maintained stringent lending criteria, leaving millions reliant on alternative credit options. Economic conditions have exacerbated these issues, forcing many households to turn to high-interest financial products to cover everyday expenses. Compared to previous years, the current slowdown in credit growth suggests that financial constraints are influencing consumer behavior more than before.
What Challenges Do Consumers Face with Credit Access?
Many Americans continue to face barriers in obtaining credit due to various factors, including low credit scores and limited financial literacy. According to PYMNTS Intelligence, 67% of U.S. consumers live paycheck to paycheck, making credit a crucial tool for managing expenses. However, a substantial number of individuals remain excluded from traditional financial services due to insufficient credit history or past financial difficulties. This situation has led to an increased reliance on alternative lending solutions.
“The credit access issue has not been solved,” said Todd Schwartz, CEO of OppFi. “If you’re not able to get a car or a home loan, how else do you build credit? It’s a real issue and it needs to be figured out.”
How Are Companies Addressing This Issue?
Financial technology platforms like OppFi aim to expand credit access by connecting borrowers with bank partners that provide personal loans. OppFi primarily serves individuals with FICO scores below 650, a group often unable to secure financing from traditional lenders. Borrowers must have a reliable income and bank accounts to qualify, and their repayment progress is reported to credit bureaus, helping them build their credit profiles over time.
OppFi has also collaborated with financial literacy app Zogo, allowing users to earn rewards while improving their understanding of financial concepts.
“This is a way for us to give back and make sure that people understand the products that they are using,” Schwartz said.
Such initiatives aim to address the broader issue of financial education while providing access to credit.
The company recently reported an 11% increase in net originations, with a notable decline in net charge-offs. As part of its strategy, OppFi has refined its underwriting models to enhance loan approval processes. Schwartz emphasized that assessing customers from a long-term perspective instead of focusing on short-term repayments helps stabilize the lending process. The company’s automated approval rate has now reached 80%.
“There’s a lot of growth ahead this year for our company, and there’s a lot of growth ahead for our consumers — and if challenging times are ahead, we’ll be there for them,” Schwartz stated.
The firm continues to offer flexibility through its lending practices, including a policy that allows borrowers to return their principal without penalty.
Credit accessibility remains a crucial issue as more consumers face financial strain. The ongoing economic environment has led to shifting patterns in borrowing and spending, with many households becoming more cautious. While alternative lenders like OppFi provide solutions, these options may not be suitable for everyone due to interest rates and repayment terms. Consumers navigating financial uncertainties should carefully evaluate available credit options and consider strategies for managing their debt effectively. Understanding credit-building mechanisms and financial literacy tools can help individuals make informed decisions and improve their financial stability over time.
