Good credit in the Black community can be somewhat of a paradox. More often than not, it’s presented as a joke, or an unattainable goal that is just as much out of reach as it is off the radar. Which begs the question, “Do Black people care about their credit?”
From a young age, I’ve watched people in my community, friends and family included, make poor decisions when it comes to credit management. Whether by completely dodging unpaid debts, over-purchasing depreciating goods, or completely ignoring credit altogether; we just don’t seem to get it.
According to The Challenge of Credit Card Debt for the African American Middle Class published by the NAACP in 2013, “just 66% of African American households report having a credit score of 620 or above, compared to 85% of white households.” It went on to state that “When asked to describe their credit score, only 42% of African American households reported having “good” or “excellent” credit, compared to 74% of white households.”
So, what’s the deal here? Why is there such a discrepancy in Black credit scores versus White credit scores? Is it an issue of mismanagement, lack of education, or another flaw in a system that wasn’t set up for us to succeed?
As with most things, there are many factors at play in the massive credit issue plaguing our community. According to NAACP’s report, African Americans accredited their poor credit to being associated with “late student loan payments or errors on their credit report.” While “White households were more likely to report that late mortgage payments and the use of nearly all existing lines of credit contributed to their poor credit scores.”
One proposed hang up for Black families was that we tend to “have fewer assets than other households to fall back on in emergencies.” This of course is a problem when the housing market crashes, as it did.
“When African Americans are engaging in the credit market, they are more likely victims to predatory and discriminatory lending which further increases their economic insecurity.” So, on top of not understanding how to properly diversify our investments, we also appear to be walking targets for scams.
My own personal opinion is that although these things play a role, our biggest set back tends to be ourselves. The majority of us are unaware of our credit, let alone how to utilize it. I remember being in high school when my Econ teacher, who was a white-haired, blue-eyed, white man, shared some wisdom on how to manage credit once we turned 18 and it blew my mind.
I was never more aware in that class than for that thirty minute spiel, because although I was used to being told what not to do with my credit, I was rarely told what to do. It dawned on me that these were things that my family couldn’t teach me. Most of them were paying for the mistakes they made because no one before them could tell them. A classic case of the blind leading the blind.
My advice is simple:
Be progressive in managing your credit. Virtually every bank offers information and resources on how to manage your credit. It’s nothing but a google search away. In addition to seeking out assistance for your own credit, make sure you begin discussing credit with your children before they turn 18. Make sure they understand the importance of utilizing credit and being aware for what is on their credit reports annually.
Lastly, even if you feel the damage has been done, there is always something that can be done to improve your credit.