“I had number-one credit before this happened,” said Chicago resident Ida Mae Whitley, 62, who refinanced her home and incurred a mortgage with more fees and a higher interest rate.
“I don’t know whether I’ll ever be able to rebuild,” said Whitley who is in danger of losing her home. Her credit score has tanked, along with her hopes for a comfortable retirement. She can’t even get approved for an auto loan. Her daughter had to delay her education to help support her parents.
Groups such as the NAACP and the National Urban League hear similar stories as the economic downturn disproportionately impacts blacks. Some community leaders say the next frontier for civil rights is rebuilding wealth in African American communities.
“Folks are going to have to work longer and work harder to even try to maintain a standard of living,” said Kendrick Curry, pastor at Pennsylvania Avenue Baptist Church in Washington, D.C. “It really speaks to a backward movement.”
As the Federal Reserve collects data to assess the recession’s impact on credit scores by race, more black Americans are already coping with the impact.
Even near the height of the country’s economic boom, blacks had lower credit scores than whites. Data collected by the Federal Reserve from 2003 – in the most comprehensive study on race and credit scoring to date – showed that less than a quarter of blacks had prime credit scores. Meanwhile, about 65 percent of whites were in this top tier.
The gap got wider as black and white Americans grew older, the Fed found. By age 75, the average black consumer’s credit score still had not reached the national average.
Banks and industry groups often cited low credit scores as one of the main reasons black consumers were denied loans at higher rates than whites. According to the 2000 Census, less than half of black households owned their homes, compared with nearly three-quarters of whites. Consumer advocates said the lack of credit in black neighborhoods was so pervasive it is dubbed “redlining.”
The housing boom helped change that.
“There was a loan for almost anybody who wanted a loan. It was just priced differently based on credit,” Andrew Sandler, a lawyer for Wells Fargo, said of the industry at the time.
The ripple effect surfaced as subprime loans imploded. Falling home prices caused black wealth to plunge 53 percent, a 2011 Pew Research Center noted.