FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.

posted on 12 November 2016

Uncovering Credit Disparities Among Low- And Moderate-Income Areas

from the St Louis Fed

A new public database helps reveal stark disparities in consumer credit in low- and-moderate-income (LMI) neighborhoods across U.S. metro areas, according to a recent article in Bridges.

In the article, Michael Eggleston, a senior community development specialist at the Federal Reserve Bank of St. Louis, examined data related to LMI neighborhoods in more than 200 metropolitan statistical areas (MSAs). An LMI neighborhood is an area where the median income is less than 80 percent of the median income in the associated MSA.

Significant Differences in Credit Profiles

Using the Consumer Credit Explorer (CCE),1 Eggleston found that the credit profiles of residents in LMI neighborhoods varied greatly among different metro areas.

Boulder, Colo., is on one end of the spectrum. Only 35.9 percent of consumers in that metro area’s LMI neighborhoods were credit constrained, which is defined by the CCE as having poor/fair credit or limited credit history. On the other end of the spectrum is Memphis, Tenn., where 77.4 percent of the consumers in LMI neighborhoods were credit constrained. The figures below show the top 10 and bottom 10 metro areas in terms of credit constrained residents in LMI neighborhoods.

top 10 metro areas for credit access in LMI neighborhoods

bottom 10 metro areas for access to credit in LMI neighborhoods

Eggleston found that LMI neighborhoods with relatively better credit tend to be in metros with a larger percentage of white residents, and they are typically found in the East, West and parts of the upper Midwest. They also tend to be in metros that have lower poverty rates.

On the other hand, metros in which LMI neighborhoods have poorer credit tend to be in the South and have larger shares of African-American residents. They also tend to have relatively high poverty rates.

Among the 10 MSAs in which people living in LMI neighborhoods have the poorest credit, the average poverty rate is 68 percent higher than the average poverty rate of the 10 MSAs in which people living in LMI neighborhoods have the best credit.

Implications of Disparities in Credit

Eggleston noted that this disparity in credit has implications for residents in these LMI neighborhoods. A good credit profile can be an important factor in determining an individual’s ability to get a car loan, rent an apartment or secure a job.

“In short, good credit can signify whether an individual’s financial situation is on the right track," Eggleston wrote. “This can be particularly powerful for someone living in an LMI neighborhood where opportunities to improve their situation can be scarce and hope can feel far off in the distance."

He also noted that the disparity may have implications for regulated financial institutions that serve LMI neighborhoods because of certain obligations under the Community Reinvestment Act (CRA).

Currently, the credit profile of an area served by a bank isn’t taken into consideration when determining whether the bank is meeting its CRA obligations. The disparity, however, “raises some important questions about the appropriate role of the CRA in promoting fair and impartial access to credit in underserved communities," Eggleston wrote.

Notes and References

1 The Consumer Credit Explorer provides Federal Reserve Bank of New York Consumer Credit Panel/Equifax data, tabulated by the Federal Reserve Banks of Philadelphia and Minneapolis.

Additional Resources



Views expressed are not necessarily those of the Federal Reserve Bank of St. Louis or of the Federal Reserve System.

>>>>> Scroll down to view and make comments <<<<<<

Click here for Historical News Post Listing

Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, using Livefyre just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.

You can also comment using Facebook directly using he comment block below.

Econintersect Contributors


Print this page or create a PDF file of this page
Print Friendly and PDF

The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.

Take a look at what is going on inside of
Main Home
Analysis Blog
Wasteful Health Care Spending
Democratic Development Lowers the Cost of Credit
News Blog
Early Headlines: Asia Stocks Mixed, Oil, Gold, Dollar Little Changed, GOP ACA Divide, Trump Budget, UK Economy Concerns, France Inflation Slows, India Tax Reform, Oz Mortgage Leverage And More
February 27, 2017 Weather and Climate Report. Short-term Forecasting Not So Easy.
Explainer: What Is VX Nerve Agent And How Does It Work?
What's Important To The Online Shopper
How Liverpool's New Local Currency Fits Into Global Trends Of Money And Power
World's Largest B2C E-Commerce Markets
Average Gasoline Prices for Week Ending 27 February 2017 Rose Over One Cent
What We Read Today 27 February 2017
February 2017 Texas Manufacturing Survey Continues to Expand But Key Internals Declined
January 2017 Pending Home Sales Index Declines
PEOPLE ARE AWESOME 2017 Amazing Talented Kids Compilation
Durable Goods New Orders Improved in January 2017
China's Continuing Credit Boom
Investing Blog
Market And Sector Analysis 26 February 2017
Trump's Address To Congress: A Preview For Investors
Opinion Blog
Brave New World: The Pill-popping, Social Media Obsessed Dystopia We Live In
What Do You Call A Lie Constructed From Other Lies?
Precious Metals Blog
Deflation And Gold: A Contrarian View
Live Markets
27Feb2017 Market Close: The Trump Bull Rally Lumbers On Despite Bearish Analysts Calls For Caution, US Dollar Settles Higher, WTI Crude End Session In The Low 54 Handle
Amazon Books & More

.... and keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Middle East / Africa
USA Government



Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day


Asia / Pacific
Middle East / Africa
USA Government

RSS Feeds / Social Media

Combined Econintersect Feed

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution



  Top Economics Site Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2017 Econintersect LLC - all rights reserved