Based on expected utility theory, this paper constructs a theoretical model of leverage and household economic vulnerability, and discusses the impact under different external shocks. Applying the survey data, this paper finds a significant positive relationship between household leverage and vulnerability, which remains valid even after the instrumental variable regression, the propensity score matching, and the replacement of the core explanatory variables and dependent variables. The positive effect of household leverage on vulnerability mainly lies in tightening household liquidity constraints and amplifying financial risk. Moreover, two external shocks: Housing prices and the unemployment rate are selected to conduct the sensitivity analysis. The simulation results show that negative external shocks will significantly amplify the effect of leverage on household economic vulnerability, while positive external shocks alleviate the effect, especially for higher leverage households. Our study can accurately evaluate the impact of leverage on urban household economic vulnerability, to better understand the welfare status of urban households, and to provide a quantitative basis for improving targeted poverty alleviation and effectively implementing household risk management strategies.