Black Americans given less access to credit than whites, report finds

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PALM BEACH GARDENS, Fla. (MarketWatch) -- Credit is not color-blind, according to a new report that finds black Americans are offered less access to credit than their white counterparts. Yet obtaining credit is a key step up the ladder of financial success, most economists agree.

Building a credit history often starts with a credit card, but there are major differences in the amount of credit offered to similarly qualified applicants living in areas predominately inhabited by black people compared with applicants in predominately white neighborhoods, according to a report by Ethan Cohen-Cole, a financial economist for the Federal Reserve Bank of Boston.In his paper, "Credit Card Redlining," Cohen-Cole controlled for the influence of factors such as housing vacancy rates, crime, and general population demographics.

The paper follows a long line of studies showing that African Americans and Hispanics get the rawest end of the credit deal.

Among other research we've tracked over the years:

  • African-Americans pay on average a 7.5% rate on auto loans compared with 6% for other Americans, according to a Consumer Federation of America report.
  • Lenders aggressively marketed adjustable-rate mortgages to persons with low credit scores without carefully explaining how they work. The result, according to the Consumer Federation of America: 37% of Hispanic and 31% of black consumers, but only 23% of non-Hispanic white consumers, preferred riskier adjustable-rate mortgages.
  • American Indians, Alaska Natives, African Americans and Hispanics are more likely to be victims of fraud than non-Hispanic whites, the Federal Trade Commission reported. At the time of the report, the top four categories of fraud were credit-related, and targeted people with high debt loads.
  • The Center for Responsible Lending, in Durham, N.C., says 52% of home-purchase loans to African-American families and 41% to Hispanics and Latinos were subprime in 2006. Meanwhile, 64% of the foreclosure filings from June 2006 to June 2007 were subprime loans. [MORE]