More Than a Number

Examining the impact of credit challenges in the Black Community

It is called “personal” finance for a reason - many people consider credit among the most private topics in their lives. In fact, 43% of Black Americans with credit challenges would rather discuss their sex life with friends than their credit score, according to a survey of 1,000 such adults by Wakefield Research for Self Financial. 

But 2021 is a year for new beginnings—and that starts with removing the shame from money conversations, and instead channeling goals and resources to achieve financial success.

The stigma keeping credit setbacks under wraps

Keeping score 
Unfavorable credit presents many challenges - and life is hard enough without using your credit score as a measure of your self-worth. However, nearly half of respondents (47%) are worried about being judged for their low credit score. Those who have tried to improve their finances in the past are worried about how they stack up. 

Access denied
Being judged can sting—but bad credit is standing in the way of more than self-confidence. In total, 70% of Black Americans with unfavorable credit have applied for a credit card or loan in the past and on average, they have been denied twice for a credit or loan in the last two years.

Prime number
Most see the major role their credit score plays in getting credit approval. The top reason they think their last credit application was denied was their credit score (67%), far outdistancing the next most-cited factor, income level (29%). Additionally, a significant number of respondents cite a factor beyond their control as a contributor to their credit or loan being denied. Nearly 1 in 5 (17%) named race or gender, factors that are illegal to consider, as top reasons why they believe their last credit application was rejected.

Understanding the generational impact

Knowledge resources 
The top places Black Americans with credit challenges learned about money growing up are their friends or family (68%), followed by their own research or past experience (45%). Only 27% say they received information about money from school or education programs.

Close advisers
Though friends or family are the go-to resource, many Black Americans with credit challenges may be wary of receiving inaccurate information. Only about 2 in 5 (43%) cite friends or family as their most trusted source for information about money. The next most trusted sources are themselves (29%) and financial planners or counselors (28%).

Who to trust? 
Those who are building for the future are more likely to rely on the pros. Black Americans with unfavorable credit who have an investment account (34%) or a retirement account (42%) are more likely to trust a financial planner than those who don’t have any financial accounts (11%). While those with no financial accounts (45%) are the most likely to only trust themselves for information on how to manage their money and finances. 

Not taken into account 
Credit issues can have a domino effect on other areas of common money management tools, putting the hopes of living the American Dream farther down the road. Nearly 3 in 10 (29%) Black Americans with unfavorable credit don’t have a checking account, only 18% have a retirement account, and even fewer have an investment account (15%).

In their ears
Many have been told that their finances are nobody else’s business. Nearly 2 in 5 (38%) say their family and/or friends have told them to stay away from lenders or banks. Those under 40 (45%) are much more likely than their older peers (29%) to say that their family and/or friends have told them to stay away from lenders or banks.

Playing catch-up
Unfortunately, that has contributed to many being behind on building a
strong financial base. Nearly a third (30%) of Black Americans with unfavorable credit have never applied for a credit card or loan in the past, including 49% of those who do not have a checking account.

Passing it down
Many Black Americans with credit challenges recognize that building financial assets is something they need to focus on. However, over a third (35%) say they’re more likely to win the lottery than leave money to their family when they die. And 39% say investing their money is something they most want to achieve this year if they had good credit, even though credit is not a factor in investing.

Swiping left
A surprising number of women are opting to pass on a key money move. Black American women with unfavorable credit (34%) are more likely than their male counterparts (24%) to have never applied for a credit card or loan in their life. Many Black Americans with credit challenges and lower income are passing on credit cards altogether. More than two in five (41%) of those with annual income under $50,000 have never applied for a credit card or loan.

Challenging times
Good credit is always important, but the impact of the COVID-19 pandemic has kicked it up a notch. Four in five Black Americans with unfavorable credit (80%) say having good credit is more important now than ever.

Taking charge
Black Americans with credit setbacks want to make 2021 the year they make it happen financially. An overwhelming majority (86%) would want to achieve some goals this year if they had good credit, including buying a house (41%), investing their money (39%) and starting a business (28%).

Plan of attack
And they’re willing to do what they can to improve their credit score. The overwhelming majority (89%) are willing to take steps in 2021 to improve their credit, including paying their bills on time (56%) and saving more money (55%). A quarter (25%) are willing to limit their credit inquiries to improve their credit score and 20% are willing to apply for a credit-builder loan to improve their credit in 2021.

Methodological notes

The Self Financial Survey was conducted by Wakefield Research among 1,000 Black American adults ages 18+ with poor credit, between January 4th and January 19th, 2021, using an email invitation and an online survey. The data has been weighted to ensure a reliable and accurate representation of Black American adults ages 18+ with poor credit.

Results of any sample are subject to sampling variation. The magnitude of the variation is measurable and is affected by the number of interviews and the level of the percentages expressing the results. For the interviews conducted in this particular study, the chances are 95 in 100 that a survey result does not vary, plus or minus, by more than 3.1 percentage points from the result that would be obtained if interviews had been conducted with all persons in the universe represented by the sample.