If Western New Yorkers learned one thing from decades of tough times and the sometimes brutal ups and downs of being a manufacturing town, it was to mind their pennies.
While many of the factories are long gone, some of the lessons from those uncertain times still linger, says Gary D. Keith, an M&T Bank economist.
So it’s really no surprise that local consumers still are a pretty conservative lot when it comes to how they manage their money.
The latest evidence of that comes from the Federal Reserve Bank of New York, which recently released data that shows how Western New Yorkers not only have wide access to credit but generally do a better-than-average job of managing it.
“We’re a lot more conservative in our use of credit in Buffalo and across upstate in general,” Keith said.
“We live within our means,” he said. “In some areas of the country, they get a little too exuberant.”
Keith thinks some of that conservative approach stems from the region’s days as a leading steel and auto parts manufacturer, where layoffs were common and consumers learned early on that job security can be fleeting.
“They don’t forget that there are ups and downs,” he said.
And that is serving us well today.
The Fed data paints a picture of the Buffalo Niagara region as a haven for generally good credit. Consumers here have higher credit scores. They’re better than average at paying their bills on time, and, as a result, have broader access to credit than the country as a whole.
Here’s a closer look at what the Fed researchers found when they looked at U.S. consumers’ access to credit and how much financial stress those borrowings are putting on budgets.
• Credit availability – Finding credit really isn’t a problem for consumers in the Buffalo Niagara region. Just 3 percent of consumers in Erie County didn’t have a credit file and a credit score at the end of last year, and the rate was even lower in Niagara County. That’s better than the national average, where almost 8 percent of consumers don’t have any credit.
The rebound in credit availability since the recession ended also has been a little stronger here than it has been throughout the U.S., although Erie County still isn’t quite back to the near-universal credit availability it enjoyed in the loose credit days before the downturn.
But that doesn’t mean that consumers are back to their free-borrowing ways.
Fewer consumers now have a credit card or a home equity line of credit than before the recession, and those consumers who shunned that type of borrowing – either by choice or because they can’t meet today’s tighter credit standards – haven’t shown any signs of taking on that type of credit during the recovery.
Roughly three-quarters of the consumers in Erie and Niagara counties had credit cards or home equity lines before the recession, but over the last five years, that percentage has hovered just under 70 percent. The same trend holds true in Western New York’s rural counties and across the country.
• Credit use – With credit harder to come by, consumers are using more of what they have. In the days leading up to the recession, about 58 percent of the consumers in the Buffalo Niagara region were using more than 30 percent of their available credit.
But that swelled to 62 percent in 2009, after the recession hit and lenders cut credit limits and toughened their lending standards, forcing consumers to tap more heavily into the borrowing capacity they already had. Since then, as credit has become a little more available, the trend has reversed a little, with 61 percent of Erie County consumers tapping into more than 30 percent of their available credit last year.
• Paying on time – We do a pretty good job of paying our bills on time in Western New York.
Since the recession ended, consumers across the country have been paying their bills on time in increasing numbers, Fed researchers said. And that same trend has taken hold in Western New York, where, over the past decade, our habit of making our payments on time has continued to be a little stronger than the national average.
At the end of last year, 83 percent of the consumers in Erie County – and 82 percent in Niagara County – had made all of their credit payments on time during the previous four quarters, which was better than the national average of just over 79 percent.
Over the past decade, the on-time payment rate steadily increased from around 80 percent in the Buffalo Niagara region in 2005. That stands out from the national trend, where the percentage of consumers paying on time dropped slightly during the recession and rebounded slowly during the early stages of the recovery. The pace of the improvement quickened over the last three years.
• Credit scores – Consumers are in a better position to borrow than they’ve been at any time in the past decade.
More local consumers have what is considered to be top-notch credit, while fewer are falling into the highest-risk category of borrowers. By and large, there now are more low-risk borrowers in Western New York than there have been at any time in the past decade, the Fed researchers found.
Almost 54 percent of the consumers with credit in Erie County had what is considered to be a prime credit score of 720 or higher at the end of last year. That’s up from 51.5 percent in 2005 and is the result of a steady rise in the number of prime borrowers over the past 10 years.
On the flip side, roughly three of every 10 local consumers with credit have credit scores that are considered to be subprime, or less than 660. That’s down from about one in three before the recession.
That’s because banks and other regulated lenders have toughened their credit standards, while nonbank lenders, which provided ample credit to risky borrowers before the recession, are much harder to find today, Keith said.
“The folks who were at the margins haven’t really been able to come back,” he said.