When you think of credit, what comes to mind? You wouldn’t be blamed if you immediately thought of credit cards, mortgages, and credit scores.
When many – maybe even most – Americans think of credit, they immediately think of their past decisions that created the credit history that affects a person’s ability to borrow, quantified in our credit scores.
For many Americans – those with strong credit histories and good credit scores (70% of Americans have credit scores considered “good”) – access to credit comes down to a quick bank application.
For growing percentages of Americans, however, access to credit is much more difficult.
Worse still, it looks like we got totally wrong credit for this band. A new study suggests we might be. And if we are, the potential fallout is huge.
The ability to access credit has always been considered a personal matter. Those who are in the habit of paying money owed in a timely manner have a higher credit score and therefore can access credit when needed. Many others, however, have had a more difficult life and often, for circumstances beyond their control, have been unable to repay the money owed on time. As a result, these same people have lower credit ratings and are often denied credit when needed.
You, like many others, may think this system makes sense, but it is often more complex. For the first time, research has demonstrated that there may be a measured link between credit insecurity, defined as the state of being without reliable access to money or the ability to borrow money when ‘urgent need, and food insecurity, which is the state of being without reliable access to sufficient, affordable and nutritious food.
You might wonder why this link may matter, and the answer is because of how we think about these two conditions that negatively affect tens of millions of Americans.
Food insecurity is seen as a structural problem that is highly dependent on geography, and now we have proof that credit insecurity is too.
While it is true that credit insecurity, like food insecurity, is a structural problem linked to geography, it is essential that we start thinking about political solutions to the situation in the same way.
Take food desserts, for example.
In no universe would anyone want to go to an area that has few or no food options and deliberately eliminate all food sources – even suboptimal food options – especially when the net result is people going hungry.
We correctly understand that reducing the options available to those who need them only exacerbates the problem for those who can least afford them. Yet that is precisely what some policymakers around the country are proposing we do with credit insecurity.
Lack of access to credit directly affects families’ ability to make the investments needed to increase their wealth, from housing to higher education to starting a business. Credit insecurity often also means that families cannot effectively respond to and manage financial difficulties and meet their basic needs.
With the demonstrated significant correlation between credit and food insecurity, policies addressing one should consider the other. Furthermore, both should be approached as structural issues, not individual or personal ones.
Ignoring how food insecurity and credit vulnerability look alike and can influence each other means failing to address the fundamental and persistent damage suffered by the most vulnerable Americans. Policy makers who offer solutions to expand access to credit fail to consider that credit insecurity is not personal, it is structural and could unwittingly slam the door in the face of the most vulnerable Americans.
Ted Gordon is the author of “Food Insecurity, Racial Diversity” and “Reservation Land: Relationships With the Credit Security”. He wrote this for InsideSources.com.