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Economy

Detroit Is America's Capital of Bad Credit

Two-thirds of the city’s residents are ranked as subprime, or worse.
Street art on a building in Detroit reflects the city's ongoing financial crisis.
Street art on a building in Detroit reflects the city's ongoing financial crisis. Joshua Lott/Reuters

There’s a lot of good news coming from Detroit these days, from a burgeoning urban farming scene to the flurry of entrepreneurial activity that has given residents some hope that this faded industrial titan may yet struggle to its feet after emerging from bankruptcy in 2015. Home values are ticking up, job losses have slowed, and there are encouraging signs of economic growth. But a new report from the Urban Institute serves as a sobering reminder of exactly how financially wounded Detroit still is: Fully two-thirds of its residents have subprime credit scores (or no scores at all).

Researchers combed through data from Experian, one of the three credit bureaus that compile individual credit ratings. These scores are used by banks and other institutions to make lending decisions about potential borrowers. Those with lower, or subprime, scores face higher interest rates and harsher terms when they try to obtain loans. Detroit’s share of these subprime borrowers is extremely high—more than twice the national average, and far worse than fellow Rust Belt burgs like Cleveland, Buffalo, Milwaukee, and Indianapolis. Only 21 percent of Detroiters have more favorable credit scores ranked as prime or more. (The next worse is Indianapolis, at about 39 percent.) And 68 percent of city residents are carrying delinquent debt, compared to a national average of 35 percent. “That’s a really striking statistic,” says Diana Elliott, a UI research associate and co-author of the study. “What comes through in this study is that Detroit residents are really in a more disadvantaged position.”