Racial and Financial Disparity and How It Affects Credit Score

Written by Alexandra Scicchitano

Black Americans and families have a significant financial hurdle to jump over when it comes to income, credit score and just overall financial health.

     According to Urban Institute, “Lower financial security means that residents are less resilient to economic shocks and less able to borrow and invest. And high housing costs make it difficult for city residents to save for financial emergencies and make ends meet.”

     In 2016, the Federal Reserve Survey of Consumer Finances said the median net worth of Black families is just $17,150. Which is substantially different from the median net worth of white families at $171,000. White families in America make 10x more than Black families do in the same country. 

     With just having a good income hard to come by for Black Americans and their families, this affects other areas of financial health, such as credit score, emergency funds and debt. 

     Prudential said that 57% of employees in America are very or somewhat stressed about their financial situation. 

      When living paycheck to paycheck, it is impossible to save and have any financial cushion if a crisis happens.

     According to Urban Institute, 46% of the population in Philadelphia is 200% below the federal poverty level compared to only 33% of the national average. 41% of Philadelphia is also Black. 

     When Black families make less than lower class median income, which is $25,624 in 2016, according to Pew Research Center, it is no wonder that they have problems in achieving overall good financial health.

     68% of Philadelphia is burdened with having to spend more than 30% of their income towards housing, which can lead to difficulties affording necessities such as clothes, food and transportation.

     This can also lead to a hard time paying bills and keeping credit scores up with minimal money to pay any and all bills. 

      The average credit score in white areas in Philadelphia is 703. While credit scores for nonwhite areas in the same city is 571. 

     There is almost a 150-point difference in credit score between Black areas and white areas in Philadelphia. 

     Having poor credit score makes it so banks and credit card companies give increased interest rates on loans, which will make an already poor family even poorer. 

     47% of people in Philadelphia have delinquent debt, while only 33% of all Americans do. Almost half of the people in Philadelphia have missed a payment on bills. 

        The overall findings of this Urban Institute research found that, “financial health is below average. Median credit scores are nonprime and high shares of residents have delinquent debt, which can limit access to credit. Also, many low- and moderate-income residents are housing-cost burdened.”

     Financial health and credit scores are important. Let D.A.L.S. Credit Solutions and Notary help you achieve that.