The African American middle class is still in poor shape when it comes to credit scores, as we tend to have less appealing scores. However, there are important different reasons for this occurring. For example, when asked to categorize their credit score, almost seventy percent of African American households reported a score of 620 or above. This rate is far lower than white households, of whom eighty-five percent reported a score of 620 or above. The gap in percentages is much the same when it comes to describing credit scores as well with regards to blacks and whites. When asked how we would describe our credit score, only a little over forty percent of African American households said they had “good” or “excellent” credit. With white households, the rate was seventy-four percent of the group. Poor credit does indeed affect African American households at a higher rate than white households.
One cause of poor credit scores for blacks is late student loan payments; however, white households are more likely to have late mortgage payments. Whites are also more likely to have used nearly all available lines of credit, thus contributing to a worse credit score in their specific situations.
Believe it or not, levels are even when it comes to bankruptcy. There are no significant differences in how often African Americans and whites file for bankruptcy. The same can be said with regards to eviction or property repossession as well. There is also no difference in the rate of either group being late with their credit card payments. However, the gap begins to widen again in the credit world when it comes to dealing with debt collectors and seeing credit tighten. Only half of white middle-class homes, for example, reported being contacted by debt collectors. African Americans are called by debt collectors at a rate almost fifty percent more with seventy-one percent of the African American households in the middle class.
One distinct way that African Americans were affected during the recession was through credit tightening. In fact, for a few years following the recession, African Americans found their availability for credit to be tightened, because more than half of African American middle class households were found to have a credit card cancelled. Some reported a reduction in their credit limit or being denied. In many ways, the difference in credit availability ties into income. With the median income of African American households being far less than that of whites, one theory is that black households naturally would not have as much access to credit. This factor, combined with more blacks attending college, is the cause of credit scores and freedom to fluctuate at a greater rate. With employment tied to your credit history becoming increasingly a popular practice, this brings forth a complex situation for African Americans, simply because it presents a catch twenty-two. You cannot get out of debt without a better job; you cannot get a better job without better credit.
At The Power Is Now we are committed to bringing equal opportunity to Americans, whether they be black, white, or any color in between. The Buyer’s and Seller’s Club within The Power Is Now is always ready to help those in need, give valuable and useful advice, and point those in need to a loan program that works for them. Getting out of poverty will not be easy; however, through NAREB’s housing initiatives and The Power Is Now Online Resource, a difference can be made in the U.S.
Eric Lawrence Frazier, MBA
President and CEO
The Power Is Now
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