Federal Reserve Bank of NY

Description:

Credit security is the ability of households to access mainstream credit and keep current on debt payments. The Credit Insecurity Index, created by the Federal Reserve Bank of New York, is intended to capture all the components that inform a community’s credit health in a composite measure. The score is meant to be interpreted in terms of place, such as a state or a county. The Credit Insecurity Index is reflective of the credit conditions experienced collectively by the individuals and households that make up the geography being examined. While it is important to understand credit insecurity at an individual or household level, assessing and comparing community-level credit insecurity can help researchers, practitioners, and community stakeholders understand the broader implications credit insecurity has for a community’s ability to access affordable credit, be resilient in the face of shocks, pursue economic opportunities, and take on community-wide investments.

The calculation for the Credit Insecurity Index involves adding the share of people who are not credit included to a value that represents the degree to which the population that is credit included is nonetheless credit constrained. In other words, the Credit Insecurity Index Score = (Not Credit Included) + (Credit Included x .25*(Credit Constraints)) where Credit Constraints = No Revolving Credit + Credit Over-Utilization + Deep Subprime Credit Score + Struggling or Consistently Delinquent Payment History.