In “Bridging the Gap: Credit Scores and Economic Opportunity in Illinois Communities of Color,” our researchers found that Illinois communities of color had high concentrations of individuals with very low, “non-prime” credit scores.  For example, in highly African-American communities, 54 percent of individuals had credit scores below 620—that’s more than three times the percentage of very low score individuals in white communities.

This bears repeating: Over half of the people in Illinois’ predominantly African-American communities likely would not qualify for low-cost, prime credit. What does this mean for these neighborhoods’ chances for revitalization?

For one, communities of color were disproportionately devastated by the foreclosure crisis. Stretches of vacant homes, many of which have fallen into serious disrepair, are common sights in many parts of Chicago, but local families may want to invest in rebuilding their communities.   Obtaining a mortgage may be difficult or costly, however, if someone in the household saw their credit damaged because they were unable to pay certain bills due to a period of unemployment.   Even finding a new, good paying job may not be enough to get a mortgage, given many lenders’ increasingly tight underwriting standards.  Access to affordable credit cards, car financing, or small business loans will also likely be limited.

A high concentration of low credit scores can affect employment and housing in a neighborhood as well. Increasingly, employers are incorporating information from credit reports into hiring decisions, and landlords routinely check credit data during tenant screening procedures.

It’s clear that high concentrations of low credit scores will challenge Illinois’ communities of color, but there are solid strategies available that can help individuals build credit histories and increase access to sustainable, affordable credit. The Credit Builders Alliance has developed a five-step toolkit to build a positive credit history.  Policymakers and funders should support efforts to make curricula like this one widely available to credit counselors. Additionally, data from this report can be used to better target these resources to communities with high concentrations of individuals who need credit repair.

Some individuals have low credit scores because of a lack of credit history or “thin file,” not because of a poor payment history. Reporting positive payment history on services like utilities, phone bills, insurance premiums, and rent can build credit and reward positive behavior.

Finally, financial institutions should expand efforts to use relationship-based underwriting. While the increasing reliance on automated underwriting has lowered costs, automation can overlook borrowers who are potentially good credit risks but lack a traditional credit history. Lenders such as Neighborhood Housing Services of Chicago and Self-Help Credit Union in North Carolina have proven that taking a more expansive view of the factors that make someone a good credit risk can be a successful model for borrowers and lenders alike.

I believe that a solid credit history is an asset that greatly contributes to an individual’s opportunities for economic security. If you can get favorable terms on credit for buying a home, starting a business, or continuing education, you’ll have more to invest and save over the course of your lifetime.

With so many families reeling from unemployment, foreclosures, and loss of income, continued advocacy for strategies like credit building that promote economic security is more important than ever. We’re partnering with Wider Opportunities for Women to train advocates to be more effective at working for economic security for people of all ages. On September 20, WOW will host a workshop in Chicago to release national poll information that will shed light on economic issues that concern people across the age spectrum and messages that resonate most strongly. I hope you’ll join us.