It wasn't too long ago that Detroit was a booming town with a robust middle class. But after the decline of manufacturing crushed the local economy, Detroit filed the biggest public sector bankruptcy in U.S. history in 2013.
And the city's troubles have left a mark on the financial stability of its residents in a big way, according to a new report from the Urban Institute.
About 66% of residents have debt in collections -- meaning more than 180 days past due -- at a median amount of $1,847. Across the U.S., 35% of Americans have debt in collections.
"Delinquent debt is quite prevalent in Detroit," said Diana Elliott, lead author of the report. "That affects future access to credit and future wealth-building potential."
Credit accessibility is limited for many residents in the city: just 15% of Detroiters have an auto loan, 27% have revolving credit (usually a credit card) and 7% have a mortgage, the report found. All three numbers are significantly below the national averages.
Since its high in 2006, the number of new mortgages has dropped by 94% in the city.
The main reasons behind the lack of credit are residents' subpar credit scores and debt loads.
The study found that just 19% of the city's population has healthy credit, which it defined as having one line of credit that hasn't been delinquent in the past year, and no lines of credit 60 days late in the past two years.
Almost two thirds of residents have what's considered a "subprime" credit score.
The report examined credit scores from VantageScore, which range from 300 to 850. A subprime score falls in anywhere between 300 to 600.
Lenders use credit scores to determine a potential borrower's ability to repay a loan for purchases like a home or car.
"Credit scores not only reflect past financial distress, but also future access to credit," said Elliott.
The healthier the score, the better the lending terms. But less than 25% of Detroit residents have a prime score, which means many are likely paying high interest rates.
And buying a big ticket item like a car or a home is a major step to wealth building.
Many Detroit workers depend on having a car to get to and from work, explained Elliott.
"They will pay more for that car over the life of that loan, in order to get to that job which probably doesn't pay as much as someone with a prime score."
Paying higher interest means less disposable income for things like saving, investing and health care.
Detroit has been rebuilding and attracting new businesses and investors, which is good news for those that can take advantage of the new opportunities.
However, Elliott stressed that it's important for the local government and private sector to work together to create programs that help people at all income levels to benefit from the recovery.
"The future of Detroit and its success hinges on the financial success of its residents. In order for the city to prosper, all the residents need to experience the momentum."