Residents in predominantly minority communities in Illinois have lower credit scores on average than those in mostly white neighborhoods — and that is a significant contributor to the racial wealth gap, according to a recent report from the Illinois Asset Building Group and the Social IMPACT Research Center at the Heartland Alliance, a Midwest anti-poverty organization.
The credit score gap between white and minority communities fuels racial inequality in the state, the "Trapped by Credit" report concludes.
In general, the report found that communities of color in Illinois are less likely than mostly white neighborhoods to have well-being indicators associated with stronger credit scores, such as higher levels of educational attainment and greater rates of homeownership and employment.
Similarly, communities of color have on average lower levels of "good debt" from student or home loans and higher levels of "bad debt" from sources like credit cards.
Since good credit scores help people gain access to better jobs, homeownership and higher education, "a cycle emerges where low credit scores feed decreased financial and social opportunity, which in turn feeds low credit scores," the report reads.