Trapped by Credit: Racial Disparities in Financial Well-Being and Opportunity in Illinois

Produced for the Illinois Asset Building Group in 2014, the report “explores the relationship between race and financial wellbeing. The findings are based on an analysis of the relationships and the strength of the relationships among the share of the population that is racially or ethnically minority, other demographic indicators, and various indicators of financial well-being in zip codes throughout the state of Illinois.

This exploration provides a look into if and how credit scores differ based on the racial composition of communities and how other factors may play into that relationship” (p.5). Peppered with graphs that illustrate various correlations between race and financial well-being, the report shows “the complex and interrelated relationships among credit, race, and indicators of future financial growth and financial well-being point to the fact that credit scores are both a product of and a contributor to racial disparity because of structural racial discrimination and exclusion. In other words, the observed credit gap is not only a facet of, but is actually feeding, the growth of racial disparity due to a disparity in access between white communities and communities of color” (p.18). (Abstractor: Author and Website Staff)

The report’s main finding is that “the relationship between credit scores and minority presence illustrates a clear racial disparity of credit in Illinois. Though many related factors help to explain some variability in credit scores, even when controlling for them, racial differences in credit persist” (p.3). The authors arrive at this statement through an analysis of education, race, homeownership, and other financial well-being data. Other findings that the authors discovered through this work include: • “Illinois communities with higher minority presence have lower (worse) average credit scores (p.3). • Communities of color fare worse than white communities on many social and economic elements, all of which play into the cyclical relationship between race and credit scores (p.3). • Strong relationships among education levels, student loan debt, credit, and race tell a story of unequal access for minorities to the resources needed afford the higher education that in turn helps build credit and wealth (p.3). • The relationships among race, employment, income, and credit scores show that more individuals of color are trapped in a career and credit cycle that is preventing them from getting firm footing on the path to economic security (p.3). • Strong relationships among homeownership, home loan debt, credit, and race illustrate that home ownership is not an equally-accessible asset. Despite the promise of wealth-building that homeownership holds and despite policies intended to curb abuse, home buying has a long history of intentional racially discriminatory activity by lenders, brokers, and communities that continue to influence home buying for families of color (p.3). • Relationships among late payments, retail debt, financial institutions, credit, and race illustrate that differences persist in terms of the types of financial products either available in or used in different communities (p.4). • Even when controlling for related social characteristics, racial differences in credit persist. This means that all else being equal, race itself is associated with credit scores, and thus communities of color face some of the most challenging barriers in trying to achieve financial security” (p.4). (Abstractor: Author and Website Staff)

• Last Updated:
• Created:
• Resource Publication Date: 2014
• Author(s): Carrow, Lindy; Hudson, Sean; Terpstra, Amy
• Organizational Author(s): Social IMPACT Research Center
• Resource Availability: Publicly available
• Posted by: Laura Aron
• Posted in: Workforce System Strategies