Self Financial, a fintech startup, has released the results of a third-party survey showing the challenges Black Americans face when dealing with credit.
The survey gives a unique picture of how Black Americans view credit and try to build savings and credit. The survey polled 1,000 Black adults ages 18+ who have poor credit instead of a general sample from all Black consumers. One of the most stunning findings is 43% of respondents with credit challenges would rather discuss their sex life with friends than their credit score. Another 47% are worried about being judged due to their credit score.
The fear and stigma of a bad credit score is a real thing for Black Americans. According to the survey, 70% of Black Americans with a below-average credit score have on average been denied twice for a credit card or a loan in the last two years.
The shame of being told you haven’t spent your money the right way and a bank doesn’t believe you can pay it back is something no one wants to experience.
Sixty-seven percent of respondents believed their credit score was the reason their application for a loan or credit card was denied. That significantly outpaced the next highest reason, which was income level (27%).
The survey also shows that most Black Americans find out about credit from their parents (68%), past experience, or their own research. Just 27% of respondents say they learned about credit in school or through an educational program.
When considering the decades of institutional racism that has plagued America before and after the civil rights movement, it’s not a surprise Black Americans are behind when it comes to credit.
One of the biggest reasons Black Americans have less experience with credit is because banks have largely shunned Black communities. Black communities in the early 1990s were full of check cashing facilities which take significant fees and the survey backs that up. Even today, small banks, Community Development Financial Institutions (CDFIs) and Minority Serving Institutions, make up the majority of banks in Black and minority communities.
Nearly 30% of respondents with a low credit score say they’ve never applied for a credit card or loan according to the survey and almost half of that 30% has never had a checking account.
The survey also showed many do not see things getting better for them or their finances in the future. More than one-third (35%) say they’re more likely to win the lottery than to leave money behind for their children. Another 39% said investing is something they’d want to do if they had good credit, even though credit is not a factor in investing.
However, Black Americans aren’t giving up and are determined to make the right moves this year. Eighty-nine percent of respondents say they’re making an attempt to change their credit score including paying bills on time and saving more money. Another 86% say they want to buy a house, invest, or start a business if their credit score increases.