One Economy, Two Credit Realities

We often describe the economy by its shape. Today, many economists describe it as K-shaped, with one group benefitting from rising stock prices, wage growth, and appreciating assets, while another struggles with higher food prices, rising rents, and increased borrowing costs.

That divide helps explain why seemingly contradictory headlines can both be true. Within weeks of each other, The Wall Street Journal published “Americans Are Falling Behind on Their $1.25 Trillion Credit-Card Bill” and “The Super Prime Credit Score Club Is Growing Rapidly.” The Federal Reserve Bank of New York reported that 13.12% of credit card balances were at least 90 days delinquent—the highest level in 15 years. Yet credit reporting firm TransUnion says more than 41% of consumers now have super-prime FICO® Scores of 780 or higher.

Credit cards are now used more than twice as often as cash, giving lenders more insight into consumers’ borrowing habits. In fact, 84% of Gen Z consumers ages 22 to 24 actively use credit cards. This generation grew up understanding both the importance of establishing a credit history and that their credit score can open doors to other financial decisions.

The credit divide often comes down to how credit is used. Those on the upper leg of the K may understand the habits that help build strong credit while taking advantage of cash-back rewards and travel benefits. Those on the lower leg may rely on credit cards simply to bridge gaps caused by job loss, rising expenses, or inconsistent income.

The two largest factors affecting your credit score are payment history and credit utilization. Paying your bills on time is the single most important factor, accounting for about 35% of your FICO Score. Balance alerts and automatic payments can help you avoid missed due dates. Paying your balance in full is generally the best move, as carrying a credit card balance just to build credit doesn’t work the way you think it would. That’s because your debt-to-credit ratio makes up about 30% of your credit score.

Credit utilization is often misunderstood because it looks at both your total credit use and each card’s limit. As a general guideline, try to use less than 30% of your available credit. Although spreading balances across multiple cards may be more favorable for your credit score than maxing out a single card, carrying a balance on any card results in interest charges that increase the cost of borrowing.

Finally, be strategic about applying for new credit. A hard inquiry may temporarily lower your score by a few points. However, multiple inquiries for the same type of loan made while rate shopping are generally treated as a single inquiry.

A strong credit score can qualify you for lower borrowing costs, improve your chances of qualifying for a mortgage or apartment, and even reduce insurance premiums in many states.

In a K-shaped economy, you can’t control inflation, interest rates, or the broader economy. But you can control the financial habits that influence your credit. While building a strong credit score won’t guarantee prosperity, it can give you more flexibility, lower borrowing costs, and more opportunities regardless of which side of the K you find yourself on.

In a changing economic environment, financial flexibility matters. If you have questions about how borrowing decisions, debt management, or your overall financial plan fit together, the experts at Henssler Financial will be glad to help:

• Experts Request Form
• Email: experts@henssler.com
• Phone: 770-429-9166

Listen to the July 25, 2026 “Henssler Money Talks” episode.