Credit is Important. Let’s Talk About It

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Credit has been pushed to the forefront of conversation, thanks to news breaking that an additional 2.5 million Americans have been affected by a data breach Equinox suffered. This past summer, hackers collected identifying information from Equifax. That included birthdates, social security numbers and even driver license details- basically everything needed to affect someone’s financial future. With that information you could easily set up new credit accounts with the users’ information. The incident was not reported by the company until September.

If this happened last year, I probably wouldn’t have cared. Like 25 percent of millennials, according to a LendEDU survey, I didn’t even know what my credit score was and didn’t monitor any activity.

But four months ago, I found motivation to become invested in my future in an unlikely place. Jay-z’s latest album 4:44, made me realize I needed to take financial literacy more seriously. I’d been anticipating the midnight release of the rappers thirteenth studio album for weeks and even set an alarm so I’d be one of the first to hear it. I expected greatness. I mean, it is Jay-z after all an, as expected, he delivered.

But mixed with the vulnerable lyrics about his infidelity and family was a theme of creating generational wealth within the black community. In his song “The Story of O.J.,” he caught my attention with the lyrics “You know what’s more important than throwing away money at a strip club? Credit.”

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It got me thinking. “How important is my credit?”

In a world where rap music is criticized for promoting spending to excess, here was Jay. An old timer in the game, talking about using drug money (he started off as a drug dealer) to invest in property.

“Culture influences our spending habits. Peer pressure is part of that, If you have the latest and greatest and I don’t, I am gonna spend even when I don’t have it, said Lomax R.Campbell management scholar practitioner and Assistant to the Vice President of Economic Development at Monroe Community College.

“People don’t often talk about this kind of thing with their friends and families,” -Baker

Campbell, who is also a member of Black Owned Business Rochester, sees those habits changing. Now 21% of Black millennials earning college degrees versus just 17% of their parents according to a 2016 Nielsen report. But even with strides being made in higher education, financial education is still lacking. Only 20 U.S. states required financial literacy training in schools last year. This leaves many Americans in the dark about their finances, including myself.

I realized I needed to step into the light. I had spent my twenties ignoring debt built up from my teens with no clue how much it had grown or how my score had changed. I got counseling from the Consumer Credit Counseling Services of Rochester (CCCS) in April where I learned, like many minority americans I was “credit invisible”.

I was sitting on a small amount of personal debt, less that six thousand dollars. But I also had no revolving credit, meaning I was not  borrowing money and then paying it back. Even though I was paying my bills, businesses are not required to report to a credit agency unless you are past due.

“Approximately 15 percent of African-Americans and Latinos were deemed credit invisible, compared to 9 percent of whites and Asian-Americans. In addition, 13 percent of African-Americans…were unscorable, compared with 7 percent of whites.” according to a 2010 creditcard.com study of credit card debt by race, age and gender.

Minority families often go generations without using credit lines, purchasing property or making investments. They focus on renting, saving or using cash to make purchases. My parents had worked hard to provide for our family, teaching us about saving but they were not exactly wise when it came to spending and had zero investments.

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“If your parents don’t know what they’re doing…they don’t have a budget that’s the only thing you see, you learn their bad habits…” said Lynette Baker Director of Outreach and Marketing at the CCCS.

While 77 percent of parents educate their kids on saving money, that number drops to a little over half when it comes to talking about budgeting and just 33 percent of parents teach investing according to a U.S. Bank survey. When that happens, you get…me.

At 29 years old, I  wasn’t allowed to borrow a pencil let alone a dollar and that is not good for black communities.

“If you live your whole life without borrowing money you won’t have a credit score to buy a house or buy a car.  Having that credit relationship is very important,” said Baker.

With higher rates of credit invisibility and traditionally lower credit scores overall, if we can’t buy homes and property, we cannot find a permanent place in our own communities. Cue gentrification or the process of improving neighborhoods so they appeal to new buyers and businesses, often forcing out people that already live there. As the messages in hip-hop changes, the community must change too.

“It is very difficult to get people to go deeper and think ‘can what I am doing be put in place for the next four generations going forward?’… literally the lack of foresight and the ability to stick to that,” said Campbell.

Talking about money can also be an issue. In a survey conducted by personal finance website NerdWallet, 43% of Americans said they would feel judged if family members knew they were in credit card debt. With no support system and negative stigmas surrounding debt, it can be hard to find courage needed to get help.

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“I think it’s a combination of things you kind of ignore it after a while, and also it’s the embarrassment factor too. People don’t often talk about this kind of thing with their friends and families,” said Baker stating the need for a support system is just as important when it comes to creating finacial literacy within a family.

I never talked about my debt or asked for help when I did not understand information regarding my credit.  Now, with help from the CCCS and motivation from Jay-Z I am more aware of what I need to do in order to maintain a good score and what doors it can open for me.

145.5 million americans affected by the Equifax breach may be uncertain how it will affect their future.  Six months ago I would not have cared, but today I am fully invested in not only managing my finances now but, planning my investments in the years to come. Something I thought I would never be able to do.

For more information on how to manage your debt and financial literacy education call the Consumer Credit Credit Counseling Service of Rochester at (585) 546-3440 or schedule an appointment at www.cccsofrochester.org.

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