March is National Credit Education Month, as well as Women’s History Month. It’s a perfect time to revisit the journey Black women have taken over the last several decades with credit and lending.
Today in the United States, anyone age 18 and over can apply for a credit card or a loan based on their credit history. Yet, this has not always been the case. Before 1974, barriers prevented women from entering the consumer economy that arose in the United States after World War II. Women applying for a credit card or a loan were faced with a myriad of questions pertaining to their marital status, as well as whether they had available and willing male co-signers such as husbands, brothers, fathers, uncles, or even friends.
Even with the applicants having full capability to repay a loan or credit card, banks would often discriminate against women based on reasons that had nothing to do with their financial abilities. Without a male co-signer, banks were unwilling to lend a woman money or issue a credit card. This, of course, severely inhibited a woman’s financial freedom and economic opportunities.
It wasn’t until 1974 when a huge step was made in women’s financial freedom with the passage of the Equal Credit Opportunity Act which granted women the right to obtain loans and credit cards separate from a man. This law also sought to protect Black people’s rights, barring shady credit practices and discrimination based on race, sex, age, nationality or marital status.
For Black women, gender and race have always been double stigmas that lenders use to discriminate. Lending and credit practices changed more so due to the diligent work of activists, who inspired the laws that prohibit bias in these areas. Both the Civil Rights Movement and the Women’s Movement contributed to anti-bias legislation in the 1970s.
While race cannot legally affect credit scores, credit score disparities still exist among various racial groups. The Urban Institute collected a series of statistics that indicate white communities have the highest median credit score at 727, which falls well into the good range on both FICO and VantageScore models. Native American communities have the lowest median credit score at 612, hovering in the fair range for both scoring models. Credit score averages for Black and Hispanic communities fall somewhere in the middle. The average score for Black communities reaches 627, in the middle of the fair range.
Beginning in the ’80s, more than half of bachelor’s degrees were awarded to women, according to the National Center for Education Statistics. This is significant, because as women became more educated, their salaries began to increase in relation to men’s salaries. We see that now as Black women are the most educated group in the country.
The income gap wasn’t closed during this time — it remains today — but it began decreasing as women attained more high-paying professional and managerial positions. The influence of the Equal Credit Opportunity Act of 1974 just a decade before continued to increase. Women now had more career options and more financial power.
In the 1990s, women’s participation in the workforce had grown to 60 percent — while men’s participation reduced to just under 75 percent — according to the U.S. Bureau of Labor Statistics. Women’s income continued to rise in relation to men’s income, moving up to 76.5 cents on the dollar by 1999. While the steady rise of women’s wages during the 1980s and 1990s is great, it’s less inspiring when you look at the income gap between women of different races. White women were earning just 76 cents to every dollar white men earned in 1999, but they still made more than Black and Latina women, who made 64 cents and 55 cents, respectively.
In 2009, the first bill that President Barack Obama signed into law was the Lilly Ledbetter Fair Pay Act. The law reinforced the protection against pay discrimination for women that had been badly undermined by a Supreme Court ruling.
Lilly Ledbetter was a manager at Goodyear Tire & Rubber who had experienced sexual harassment and pay discrimination. She complained to the Equal Employment Opportunity Commission and initially won her case. That victory was later reversed by an appeals court.
The case went to the Supreme Court, which ruled in favor of Goodyear. The court said that existing federal law required employees to challenge wage discrimination within 180 days of the discrimination occurring — even if the employee didn’t find out about it until later. Essentially, as long as an employer kept the discrimination under wraps for six months, it was fine to pay women unfairly compared with men. Sounds absolutely absurd, but this was the law. There were eight men and one woman on the Supreme Court at this time, and the woman justice, Ruth Bader Ginsburg, wrote a dissent and read it from the bench when the court’s opinion was shared. It was groundbreaking.
The Credit Card Act of 2009 aimed to increase fairness and transparency to consumers by issuers. Part of the act called for issuers to determine whether cardholders could reasonably pay before extending them a credit card or increasing their credit limit. It made it difficult for stay-at-home mothers to obtain their own cards, due to their lack of access to income and assets.
But in 2013, an amendment to the act changed the rules to include income and assets the stay-at-home parent has access to. This means that stay-at-home mothers can use their household assets and income to prove they can pay off their credit cards.
This was another win for women because they are more likely than men to stay at home with children. According to a Pew Research analysis of Census Bureau data, 7 percent of dads stayed at home compared with 27 percent of moms, as of 2016. Regardless of the reason they’re staying home, they can use their spouse’s income to apply for credit because of this amendment.
Oftentimes, I hear Black women say that they are not good in math or bad with money as explanations for why they aren’t where they should be financially. A lot of this is how we are historically taught about money and credit. This can create a dynamic for many Black women in which they don’t feel deserving of the access to credit and loan opportunities for personal or business needs.
Black women throughout history, and still today, have been deprived of property rights or the opportunity to control our own finances. How can women develop skills and the confidence needed to manage their money effectively, if it isn’t even considered to be theirs?
Black women have made exponential strides within the past several decades in terms of financial freedom. If we create spaces for Black women to talk about money, understand our “money roots” and our inherited money stories, it facilitates breakthroughs that can improve our relationship to money for our lives and for generations to come. We can have the opportunity to clarify values, deepen knowledge and prepare to direct our money in ways that will make a difference for us and the people we care about.
