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The distribution of subprime borrowers

Most economists agree the financial sector and high levels of household debt played an important role in the previous recession. But since 2008, the levels of both household debt relative to income and debt service payments relative to income have fallen. The reasons for the fall are hard to pin down and could be driven by a lower demand for credit by borrowers or stricter lending requirements by lenders. Nonetheless, an important implication of lower levels of debt and lower debt payments is an improvement in borrowers’ credit scores, as these factors would translate into less debt and fewer missed payments, which have an important weight in how these scores are computed.

The two graphs show the percentage of the population with a credit score below 660 in each U.S. county in 2009 and 2016. A person with a score below 660 will have a harder time securing credit from a lender and may have to pay a higher interest rate if a loan is secured. Comparing 2009 and 2016, we see that the percentage of the population with a subprime credit score has decreased substantially, consistent with the recent changes described above. In addition, the graphs show that counties in the south and southeast have a larger-than-average concentration of subprime population.

How these maps were created: Select GeoFRED’s “Build New Map” option at the top right of the home page. Use the “Tools” menu on the top left to set “Region Type” to “County.” Type “Subprime Credit Population” in the search box. Select the desired date from the drop-down menu. Finally, under “Edit Legend,” change the number of color classes to 9 and set the interval values to 10, 17, 24, 31, 38, 45, 52, 59, and 66.

Suggested by Maximiliano Dvorkin.

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