Earlier this year, the New York Fed released the Long Island Credit Profile, the second in a series of reports examining select geographies in depth using the Community Credit framework and indicators. See our previous post detailing the framework for how to interpret the analytics for practice.
Long Island, which consists of Nassau and Suffolk Counties, ranks among the highest in the nation by various measures of credit access. Local leaders, community groups, and residents noted that while the region may seem prosperous at the macro level, many communities lagged in economic and financial well-being. Further, they cited a lack of objective data and analytics to unmask the underlying inequality and the dimensions of credit problems in distressed neighborhoods. Long Island, like many thriving regions and cities, has severely distressed communities that are not apparent in macro metrics.
To bridge this data gap, our report provides a detailed view into the credit outcomes and experiences of the individuals living in Long Island’s neighborhoods (as defined by zip codes). Consistent with anecdotal information, the report shows varying levels of well-being among residents of different neighborhoods, with some zip codes ranked among the lowest in the nation by certain Community Credit indicators. Below we briefly review the report’s key findings, including where credit needs are most extreme and the types of issues that may exist.
Long Island Regional Analytics
Historically, credit access and outcomes have been very positive for the region as a whole. As of the fourth quarter of 2017, 96.7% of Long Island’s adult population had a credit file and a credit score (we say these individuals make up the “credit economy” since they at least have access to traditional credit products). This value is higher than that for the United States (89.3%) and New York State (85.4%). The vast majority of “credit economy” residents also have a revolving credit product — such as a credit card or a home equity line of credit — which means they likely have quick and easy access to credit when they need it. Long Island’s credit economy also tends to perform well based on the debt management indicators: the share of consistently delinquent borrowers — or individuals who are delinquent on at least one credit obligation for each of the last five quarters — was 6.2% in the fourth quarter of 2017, versus 8.6% for the U.S. and 7.2% for New York State.
A different pattern emerges at the zip code level. The micro-data analytics show that credit conditions, experiences, and needs vary across neighborhoods, with high-needs neighborhoods frequently located adjacent to high-performing ones. We identify 18 zip codes (out of a total of 174) that are among the lowest-performing in the U.S. when measured by one or more of our Community Credit indicators. Our findings should be supplemented by local intelligence to form a complete picture, given the many factors that exist on the ground.
1. Nine zip codes — 11542 (Glen Cove), 11568 (Old Westbury), 11719 (Brookhaven), 11790 (Stony Brook), 11901 (Riverhead), 11944 (Greenport), 11946 (Hampton Bays), 11968 (Southampton), and 11980 (Yaphank) — are flagged by the indicators as having an access-to-credit problem. These zip codes have the smallest credit economies among all zip codes in the nation, but are not ranked among the lowest by any of our other indicators. This combination suggests that the local credit economy, while relatively small, is managing debt prudently. These neighborhoods may benefit from outreach or programs focused on broadening access to credit.
2. Four zip codes — 11520 (Freeport), 11553 (Uniondale), 11722 (Central Islip), and 11950 (Mastic) — are flagged by the indicators as having debt management problems. Most of the residents in these neighborhoods are in the credit economy and use revolving credit products, but tend to have more debt distress than other parts of Long Island. These zip codes have low shares of individuals with strong payment histories, and high shares of individuals with consistently delinquent payment histories. These neighborhoods may benefit from strategies and interventions that prioritize relieving debt distress. Payment irregularity may be caused by a number of factors (for example, job loss, irregular flows of income, family emergency, etc.), so programs should target the specific needs of a neighborhood. Financial literacy and debt management assistance, among other options, might be considered.
3. Two zip codes — 11713 (Bellport) and 11798 (Wyandanch) — are flagged by the indicators as having both debt management problems and issues around credit capacity, or the ability to obtain funding easily and at favorable terms. Similar to the second group, these two Suffolk County zip codes also have many individuals with debt distress. In addition, many residents in these zip codes have utilized their revolving credit limits beyond the 30% threshold. Since the prevalence of revolving credit products is high across Long Island, extensive credit utilization will constrain the capacity for many to borrow. The Wyandanch zip code has both high utilization and a large share of individuals with low credit scores. In contrast, the Bellport zip code has high credit utilization, but did not rank among the lowest for credit score concerns. Such differences may suggest more focused policy priorities and responses. While both zip codes may benefit from credit education, Wyandanch may benefit from credit remediation and credit-building programs as well, in order to raise credit quality and build credit capacity.
4. Group 4: Three zip codes — 11550 (Hempstead), 11575 (Roosevelt), and 11951 (Mastic Beach) — are flagged by the indicators as neighborhoods with credit access, credit capacity, and debt management issues. Similar to the first group, these neighborhoods have relatively small credit economies, meaning access to traditional credit products is less prevalent. Further, residents that are part of the credit economy exhibit both capacity constraints, with high rates of utilization, and debt distress, with high shares of consistently delinquent borrowers. Due to the more widespread credit concerns, these zip codes may benefit from a broad spectrum of policy strategies and interventions.
These findings show the importance of analyzing local conditions, since overall county- or state-level data can mask unequal patterns that may persist beneath the surface. While Long Island overall does not initially appear to have major credit problems, a deeper look into the region’s neighborhoods shows certain communities are struggling acutely. Click here to read the full report.
This article was originally published by the New York Fed on Medium.
The views expressed in this article are those of the contributing authors and do not necessarily reflect the position of the New York Fed or the Federal Reserve System.