OPINION: Credit programs for BIPOC communities can narrow the racial wealth gap

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by Tierra Bonds


“Black people are lazy! They are financially irresponsible and buy things they cannot afford, like jewelry and fancy cars. They even have children they can’t afford. They don’t educate themselves about finances, and when they go to college, they often don’t get degrees that pay enough money. – said by much of society using stereotypes to justify the lesser economic state of black Americans and, in some cases, justify their privilege.

Hearing these types of statements as a black teenager 15 years ago led me to work two jobs in high school and college. I did it to make ends meet, break those stereotypes, and avoid being labeled as a lazy, poor, or stupid black girl. Imagine how heavy that was.

I learned that no matter how hard I tried, there was no amount of hard work, income, or education I could have to undo over 400 years of prejudice and discriminatory practices.

Throughout this time, I noticed that many of my peers (who were mostly white) didn’t have the same pressure to chase after money because they had financial support from their parents.

By learning about American and black history (not the history we were taught in school), I learned how deeply rooted wealth inequality is – and always has been – in America. The connection between wealth and privilege is so obvious that even white men are able to see it. I was relieved to read this from Christian E. Waller, professor of public policy at the University of Massachusetts in Boston:

“Racial disparities in wealth are not the result of individual or family choices, but rather the result of structural racism in American public policy.”

Because of structural racism, it should not be the sole responsibility of an individual or family to correct these disparities. The ongoing inequalities suffered by black Americans are far more important than the choices of my grandparents, my parents, or myself. Much taller than me begging my grandmother to take me to submit applications and resumes at 15; more than working for Hollister clothing and the Department of Corrections, holding down 2 jobs at 16 while missing events with my friends; more than rushing from work to night classes at college, trying to compensate for the many racial inequalities. There is no way I can solve this problem on my own.

How the Racial Credit Gap Affects the Racial Wealth Gap

To begin closing the racial wealth gap, we need to understand that the credit gap is a direct result of institutional racism. I recommend that the organizations and individuals who have benefited from generational wealth be part of the solution and use their money to fix it.

Wealth = savings + assets – debts. The average wealth for whites is $171,000 and $17,100 for blacks. Home ownership and business ownership are the most common ways to build wealth, and both require capital. Unless you have sufficient capital to buy a house, you will have to resort to credit. Credit can also be useful in many cases when starting a business.

The average credit score is 734 for whites but 677 for blacks. I reached out to industry experts in Seattle to get a concrete example of how this credit gap plays a role in building wealth.

According to a recent report by Jennica Lynn of Compass Real Estate, the median sale price for homes in South Seattle (zip code 98108) is $625,000. A Seattle-area mortgage lender also ran two pricing scenarios for a 30-year mortgage for this median home price. A person with a credit score of 677 (the average black credit score) ends up paying an interest rate of 4.125% and ultimately a monthly payment of $2,877.61.

For someone with a credit score of 734 (the average credit score for white people), the interest rate is 3.5% and the monthly payment is $2,666.20. The monthly difference is $211.41. That means the average black family would pay an additional $2,536.92 in interest every year. This amounts to paying an additional $76,107.60 over the life of the loan.

Let’s see this in another form:

734 credit score 677 credit score
Postal code 98108 98108
house price $625,000 $625,000
Term of mortgage 30 years 30 years
Interest rate 3.5% 4.125%
Monthly payment $2,666.20 $2,877.61
Additional interest paid annually $0 $2,536.92
Additional interest paid over the life of the loan $0 $76,107.60

What can you do with an extra $2,536.92 per year? What if it was invested in an investment account for those same 30 years at a modest 1.5% interest rate? That $76,107 turns into $110,000, further widening the racial wealth gap.

Think about it for a second.

How can we say we care about closing the wealth gap if we don’t pay attention to the credit gap and we’re okay with black families paying $76,107 more just in interests relative to average white Americans?

How can we bridge the credit gap?

Well, that’s what we do at Take Charge Consulting LLC. I founded the company in 2017 after experiencing the complications of bad credit. I had trouble finding companies I trusted to help me and I didn’t know where, how or even if I could get help. I knew that if I was struggling with credit, others in my network were too because we hadn’t been told about it in school.

At Take Charge Consulting LLC, we are focused on credit repair and use the Fair Credit Reporting Act (a law enacted to allow consumers to dispute items on their credit report) to the benefit of our clients and repair their credit for them. By removing negative accounts from their credit report, customers can see an increase in their credit score. Our program also offers credit building/rebuilding and credit education. Through a mix of credit repair, reconstruction, and education, we’ve been able to help hundreds of people reap the benefits of good credit, which is most often home ownership and starting a business. a business, giving them a chance to build wealth.

Who should be responsible for closing the credit gap?

As the credit gap narrows, our economy and all citizens will benefit. Unfortunately, the burden of correcting this unfair system is currently borne by those who have already been most affected by it. I see it all the time in my work. Many people who hire us for credit repair struggle to add another bill to their budget. And many can’t afford to hire us at all, which leaves them continuing in the cycle of bad credit, leading to even worse credit. Some seek to solve their credit problem through Internet solutions that may be myths, further damaging their credit or wasting their money.

Organizations (nonprofits, financial institutions, churches, and schools) that focus on serving the underserved and want to help people build wealth should emphasize credit repair and credit education. If these organizations do not provide credit repair, they should partner with a reputable credit repair company to help them do so. Many organizations offer financial literacy training, which is great; however, this does not solve the credit or wealth gap. It is access to credit that is needed and access to credit for many marginalized people means repairing their credit.

So what can you do as an individual?

People who have benefited from generational wealth should also be responsible for closing the credit gap.

Here are some options:

  1. Sponsor a person to place them in a reputable credit program; you can do it through my company.
  2. Donate to nonprofit organizations that provide credit repair. Here are some nonprofit organizations that partner with Take Charge Consulting LLC to provide credit repair to their communities:
  3. Share this article with your network as many are unaware of racial credit and/or the wealth gap.

What can you do as an organization?

Here are some options:

  1. Partner with a reputable credit repair company to provide credit repair and credit education that works for your organization and your customers.
  2. Hire staff and create a team that provides your customers with credit repair and training.
  3. Provide credit repair as a benefit to your staff.

Closing the racial wealth gap will take much longer

The credit gap alone will not close the racial wealth gap; we need more solutions. For example, reparations for black people are crucial to closing the racial wealth gap and restoring wealth that has been stolen and withheld from black families across the country for centuries. Reparations are a way to address these injustices on a large scale and on a national scale. And as we work toward big structural solutions, let’s also do what we can, right now, like helping individuals access more wealth through good credit.

Conclusion

We all know that home ownership and business ownership is a surefire way to build wealth, and for that, good credit is necessary. And because of institutional racism, it is everyone’s responsibility to correct these disparities, especially organizations that serve the underserved and individuals who have benefited from generational wealth.

Investing in credit programs for the underserved is a simple and necessary step you can take today to close the credit gap, which in turn can close the racial wealth gap now and for generations. future.


The South Seattle Emerald is committed to maintaining space for a variety of viewpoints within our community, with the understanding that differing viewpoints do not negate mutual respect among community members.

The opinions, beliefs and views expressed by contributors on this website do not necessarily reflect the opinions, beliefs and views of Emerald or the official policies of Emerald.


Tierra Bonds is the founder of Take Charge Consulting LLC, which provides credit repair and business counseling services to enable young professionals to achieve their credit, income and lifestyle goals.

📸 Featured Image: Photo by Yulia YasPe/Shutterstock.com

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