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One of the building blocks of financial health is having a good understanding of credit – including how to use it responsibly.
Wells Fargo is proudly sponsoring this month’s Financial Literacy supplement in the hope of exposing readers to financial tips and tactics that will help them not only manage their finances well but also make smart use of credit.
Recently, we launched a video series called “Making it simple: A conversation about buying your first home.” The series was put together with the help of a variety of financial bloggers as well as Cy Richardson of the Urban League and Kristy Fercho, head of Wells Fargo Home Lending. Our hope was to help potential buyers – especially in the African American community – explore the homebuying process in a way that is engaging and informative. Readers can find the series by visiting our playlist on youtube (https://www.youtube.com/c/wellsfargo/playlists).
In this supplement, we also explore two other very important topics that touch credit. The first is to help consumers better understand their credit scores. As we share in the article, a credit score is part of your financial power and it can be a valuable tool to help you achieve your future financial goals.
The second topic is one that is important to many homeowners. We provide a step-by-step guide for homeowners who entered a forbearance payment plan during the pandemic because of financial difficulties. Many of those plans will end this year, so it’s important for those homeowners to take action now and call the servicer for their home loan so that they are exploring the best possible options to exit their plan. This is an important part of our commitment to sustainable homeownership, and we want to help as many homeowners through this process as we can.
As you can see, credit is a vital part of your overall financial health, and there are lots of topics to explore when it comes to getting credit, evaluating credit and keeping your credit healthy. Please take a look at the entire supplement and visit our resources online at www.wellsfargo.com/ myfirsthome or www.wellsfargo.com/ goals-credit/smarter-credit/ to learn more and continue your credit education!
To Be Worthy
Credit Worthiness Still Elusive for Many
Dr. Shantella Y. Sherman Special Editions Editor
One of the great misconceptions about financial literacy in America is that Black people are predisposed to poor money management. Unfortunately, a long history of discriminatory lending and banking practices that target non-Whites, is often overlooked by those who tout such theories.
From 1933 to 1968, for instance, U.S. banks denied Black Americans access to financial services in a practice known as redlining. While this practice is illegal today, it had catastrophic, lasting results and forced Black families into relying on high-fee financial products such as payday loans and loan sharks to secure quick money.
Without bank accounts and access to loans to purchase homes, African Americans faced the opening of what would be a wealth gap that has spanned generations.
Additionally, credit scores – the three-digit number associated with credit worthiness – impacts almost every facet of our financial life and longevity but remain low for Black Americans. Credit scores were created in 1956 by Bill Fair and Earl Isaac — the name FICO is an amalgamation of their names (Fair, Isaac and Company).
But equally discriminatory, FICO scores do not factor in income, savings, utility bills, job status, or debit transactions. Instead, FICO uses data from individual bank accounts, mortgages, and savings – all of which Blacks have in fewer numbers through redlining -- to generate a score. When we consider that Black homeownership rates are 30 percent lower than white homeownership rates, it only adds to the wealth gap if apartment and utility bills have no value in the rubric.
Credit scores are closely tied to someone’s ability to grow wealth and succeed financially in the U.S. since scores often determine eligibility for loans, apartment rentals, and even jobs.
A low credit score may also result in lost job opportunities.
Carmen Perez, founder of Make Real Cents, noted in a recent Business Week article that she had a job offer rescinded due to negative marks on her credit report.
“At the time [the marks] included a defaulted student loan. The pay that I would have earned from this particular role would have helped me pay back my student loan debt faster, but that benefit was never realized.”
So, how do we become credit worthy against seemingly stacked odds? Invest in your financial future by taking courses and reading books about how credit, loans, and repayments work.
Try products like Experian Boost, which launched in 2019 and helps you factor in lease payment histories with a goal of boosting your credit score.
Find out if your area has legislation, like New York’s Stop Credit Discrimination in Employment Act, which prohibits most employers from checking an applicant’s credit history to make hiring decisions. If that legislation is not active, contact your local representatives to seek help.
In this Quick Guide: Loans, Loans, Loans! we offer a few tips and information on how to navigate the loan system and ways of keeping your sanity while you do!
Read, Learn, Grow.
5 Dr. Shantella Sherman (Photo by India Kea)
5 Fair housing protest in Lake City, 1964 noted that without bank loans, few had the ability to establish a decent FICO score. (Photo courtesy of the Seattle Municipal Archives)
Homeownership more affordable.
M&T has options to help you achieve homeownership. You may be eligible for solutions to help: • Reduce the cash needed at closing • Lower monthly payments • Save thousands by paying less interest • Qualify with a less-than-perfect credit history Get started with one of our mortgage specialists by calling 1-888-253-0993 or visit us at mtb.com.
Equal Housing Lender. Certain restrictions apply. Subject to credit and property approval. ©2021 M&T Bank. Member FDIC. NMLS# 381076. 57100 210510
