US credit card debt hits record $1.29 trillion as debt-free Americans face credit card and loan rejections

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US credit card debt hits $1.29 trillion as debt-free Americans with little credit history face rejections for credit cards, car loans and mortgages.

US credit card debt has reached a record $1.29 trillion, even as some financially responsible Americans are struggling to get approved for basic credit cards and loans. People earning six-figure salaries, having healthy savings and carrying no debt are increasingly facing instant loan rejections from banks.

The total credit card debt in the US has increased by 67% since early 2021, according to data from the Federal Reserve Bank of New York. At the same time, millions of Americans who avoid borrowing are finding it difficult to establish a credit history that banks can use to judge their financial background.

Data from the Consumer Financial Protection Bureau (CFPB) shows that an estimated 25 million American adults have credit files that are either too thin or outdated to generate a standard credit score, according to Fox Business.

This means that people who have little or no borrowing history may struggle to get loans, even if they earn well and have enough savings. Modern banking algorithms look for recent credit activity to understand how consumers handle borrowed money.

Jade Warshaw, co-host of The Ramsey Show, said banks are not necessarily punishing people for living debt-free, but they are not prioritising them either. She told Fox News Digital that banks make money from customers who use their financial products, so people who do not borrow may receive less attention.

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Credit repair specialist and founder of Micah Abigail LLC, Micah Smith, also said that the credit system can work against people who choose to live without debt. She told Fox News Digital that although avoiding debt is a responsible financial goal, the way credit scores work can make it difficult for such people to qualify for loans.

Smith explained that credit scoring algorithms look for activity and want to see how a person has handled borrowing.

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