A new study on the transition to credit visibility has found that the way consumers establish credit history can differ greatly based on economic background.
The CFPB said it found consumers in lower-income areas are more likely than those in higher-income areas to become credit visible due to negative records such as a debt in collection. Consumers in higher-income areas are more likely than those in lower-income areas to establish credit history by using a credit card or relying on someone else. The study also found that the percentage of consumers transitioning to credit visibility due to student loans more than doubled in the last 10 years, the CFPB said.
“It is no secret that lower-income consumers face challenges in the financial marketplace,” said CFPB Director Richard Cordray in a statement. “Today’s study shows that even at the beginning of their financial lives, they are faced with higher hurdles to gain access to credit, which hinders them from turning their version of the American dream into reality.”
In 2015, CFPB said it estimated that 11% of adults in the United States, or about 26 million people, are credit invisible with no credit history at one of the three nationwide credit reporting companies. “Without a sufficient credit history, consumers face barriers to accessing credit or higher costs,” the CFPB said. “This issue disproportionately impacts consumers who are African American or Hispanic, and people who live in low-income neighborhoods. It can also impact some recent immigrants, young people just getting started, and people who are recently widowed or divorced.”
The post Study finds differences in how rich, poor build credit history (if they can) appeared first on CUInsight.
June 08, 2017 at 08:41AM
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