YOUNG ADULTS in majority Black and Hispanic communities tend to have lower average credit scores compared with those who reside in majority white communities. (Credit: Getty Images)
by Laura Onyeneho
Houston Defender
It’s not just about whether you can buy a car or get approved for an apartment. It’s about freedom. Options. The ability to say yes to opportunities without being held back by a number most of us were never taught to understand.
For many young Black adults, that number—your credit score—can silently shape your future before you even get a chance to build it.
And the odds aren’t in our favor. Research from the Urban Institute shows that 25 to 29-year-olds in majority Black communities have a median credit score of 582, which is below the subprime level of 600. That’s more than 100 points lower than young adults in majority White neighborhoods. Even more alarming, nearly a third of young people in Black communities saw their credit scores decline as they got older, instead of improving.
“Your credit score is one of the first ways lenders and even landlords decide how trustworthy you are with money,” said Dr. Johnny O’Connor, Board Chair for Youth Programs of the Texas Black Expo. “It can impact everything from getting approved for an apartment to the interest rate on your car loan.”
O’Connor says young adults should understand the basics.
What is a credit score?
A credit score is a number ranging from 300 to 850 that reflects your creditworthiness. It’s calculated based on your payment history, the amount of debt you owe (especially compared to your credit limits), the length of your credit history, the types of credit you use and how often you apply for new credit.
Many young people believe they can wait until they’re older to care about credit. But Dr. O’Connor warns against that mindset. “A low credit score could mean you pay double or even triple for the same house over time due to higher interest rates,” he said. “Even if you’re not buying a house right now, poor credit can cost you more in the long run.”
Key factors that shape your score
Credit scores are made up of several components, but two stand out, especially for beginners:
- Credit Utilization: This is how much of your available credit you’re using. “Never go over 30 percent,” said O’Connor. “If your credit card has a $10,000 limit, keep your balance under $3,000.”
- Payment History: Always pay your bills on time. Even if you can’t pay the full balance, paying at least the minimum helps build a strong history of reliability.
- Credit History: Credit scoring companies assess credit age, or “depth of credit,” to determine a person’s credit management ability, which is crucial for future loan decisions.
- Mix of credit: Credit scoring systems favor a mix of installment debt and revolving accounts, indicating that managing multiple debts and credit types can improve credit scores.
- Opening a new line of credit: Hard inquiries on your credit can result in a few points being deducted from your score for each application. To maintain a healthy credit score, it’s recommended to space out new credit applications by at least six months.
How to plan strategically
Managing money and building credit is a strategic balancing act—one they’ve often had to figure out on their own. Maisha Walker, a college graduate with an accounting degree, is among a growing number of young adults taking personal finance into their own hands in the absence of early financial education.
“Accounting just made sense for me,” said Walker, who graduated in late 2022 and now works in the industry. “I’ve always enjoyed math, had a mind for business and saw it as a stable career choice.”
But even with a numbers-driven mindset, Walker admits the credit system has been one of the more opaque financial concepts to grasp.
“I think the most confusing thing is how credit scores can fluctuate even when you’re doing everything right,” she said. “I pay off my balances every single month and still I’ll see my score dip a bit and I don’t really understand why.”
Walker’s financial journey became more intentional during her senior year of college, when the looming reality of adulthood set in, thinking about buying a car, renting an apartment and building her credit. That’s when she got her first student credit card, charging only small expenses like gas and meals and making sure to pay the balance in full every month.
“I knew that building a good credit score was important for my future,” she explained.
Today, Walker considers herself financially responsible. She tracks every dollar she spends using a self-made Excel spreadsheet. Each month, she calculates her savings and evaluates where her money is going. She gives herself strict budgets and is intentional about what she chooses to splurge on.
“Saving has been one of the biggest lessons,” she said. “There are always unexpected expenses that come up, so it’s important to have a cushion for those moments.”
Despite her background in accounting, she believes financial literacy—especially around credit—should be taught earlier in life. “Credit scores should be more straightforward,” she said. “A lot of us are still confused by how it works because we were never taught.”
How to build and maintain good credit?
O’Connor offers these foundational tips:
- Start small. A student credit card or secured card can be a good entry point, but only if you use it wisely. Make small purchases and pay them off in full every month.
- Pay on time. Every time. Payment history makes up a big chunk of your score. One late payment can stick around for years.
- Keep your balances low. Try to use less than 30 percent of your credit limit at any time, even lower is better.
- Avoid unnecessary new credit. Every time you apply for credit, your score takes a hit. Don’t apply for multiple cards or loans at once.
- Check your credit report. Everyone is entitled to a free credit report from each of the three credit bureaus every year at AnnualCreditReport.com. Use that to make sure everything on your report is accurate.
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