Five Questions with Gary Korotzer, exec VP, Wells Fargo Consumer Credit Solutions
In December, Wells Fargo released its first annual “How America Buys and Borrows” survey of U.S. consumers, examining perceptions and attitudes toward the economy and personal financial situations. The study surveyed more than 2,000 Americans, aged 18 years and older, in September 2013. Weightings on age, gender, education and income were applied to achieve results that are representative of the U.S. population as a whole. Ipsos, a global market research company, conducted the online survey on Wells Fargo’s behalf.
The Score connected with one of the executives behind the survey, Gary Korotzer, leader of the Consumer Credit Solutions Group at Wells Fargo, to discuss the survey results, particularly as they reflect notions about personal credit, credit scoring, and the emerging economic power of the Millennial generation — consumers born in a post-1983 baby boom, who began entering adulthood around the turn of the millennium, in 2000-2001.
1. What were some of the positive indicators with respect to the sentiments of the Millennial generation?
When it comes to their perception of the economy, Millennials are more positive about the future. Sixty percent of them say that a year from now they feel their personal financial situation will get somewhat or much better. In contrast, only 34 percent of boomers said the same thing. The survey also uncovered generational differences in how consumers choose to manage or strengthen their financial situations. Boomers and Gen Xers are more likely to say they actively reduce their debt (42 and 35 percent, respectively) while 35 percent of Millennials say they choose to focus on increasing their savings.
2. Were there any generational differences in the way survey respondents answered questions related to their credit scores?
Overall, more respondents said they are proud of their credit score than concerned about it (40 percent versus 22 percent). And, more than half of respondents have checked their credit score or report in the past year. Boomers are more likely than other generational groups to be proud of their credit rating and believe that a credit rating is a reflection of how responsible one is with their money. Seventy-seven percent of Americans feel their financial situation is moderate to good – which is an improvement from prior studies, and is great news as we start a new year. It is important for consumers to put themselves in the driver’s seat when it comes to managing their finances responsibly.
3. A relatively few consumers say they are financially prepared for an emergency. What recommendations do you have for consumers who want to be better prepared for an unexpected emergency?
Survey results suggest few people feel prepared for the possibility of an emergency. And if one occurs, nearly one in five don’t know what they would do.While emergencies can’t always be avoided, having an emergency savings fund can take some of the financial sting out of dealing with these unexpected events. These funds are usually a separate savings or bank account used to cover or offset the expense of an unforeseen situation. A good goal is to put away at least three to six months’ worth of expenses. This amount can seem daunting at first, but the idea is to put a small amount away each week or two to build up to that goal. Emergency savings should be placed in stable accounts that can be accessed easily without taxes or penalties.
4. According to the survey, nearly 80 percent of respondents said they have purchases of $2,000 or more planned within the next two years. What tips can you provide to help these consumers get the best deal if they choose to finance that purchase?
In our survey, 38 percent of respondents said for major purchases like appliances and vacations, they save the full amount and then pay for the item. An even higher percentage of Millennials – 45 percent – say this is true. Regardless of whether you pay in full or choose to tap into credit, we offer the following five tips to make the most of a large purchase:
- Consider your needs. Is this item something you want or truly need? Ask yourself what needs you’re trying to fill by making this purchase.
- Determine your budget. Decide how much you can spend on this purchase and still cover your other expenses.
- Look at any existing credit products you already have before opening a new one. Generally speaking, opening accounts you don’t intend to use regularly may negatively impact your credit score.
- If you are applying for a new credit product, make sure you understand how it works – including any fees or conditions.
- Understand how much the monthly payments will be and have a plan to pay off the loan before you borrow. And if you can’t afford the payment – don’t borrow.
5. What surprised you about the survey and does any of the data give you pause for concern?
It was gratifying to see positive feedback from respondents – nearly three quarters feel their current financial situations are moderate to good, and 40 percent expect their situations to improve. Overall, consumers’ attitudes about the economy are slowly shifting from low metrics seen a few years ago and that optimistic outlook for the future is an important key to financial success along with having clear goals and charting a course to get there. On the flip side, respondents were candid about areas for improvement. For example:
- Only one in four would call themselves “financially savvy”
- Only one in four feel they do a good job keeping their household finances in order
- Few feel they have achieved their goals (only 13 percent of respondents gave this question top box scores)
- Few (one in five) are prepared for an emergency
We want consumers to take charge of their finances by understanding their current situation and their options. One of the best ways to help consumers is by learning about attitudes and perceptions of the current economy and personal financial situations, which was the reason why we conducted this survey.