Access to Credit for Adults With Disabilities

Quick Answer

Research from the National Disability Institute found that the percentage of households with an unmet need for credit was 1.7 times greater in households with a disability than in those without disability: 20.7% and 12.1%, respectively.

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This article is a guest post from a writer with the National Disability Institute.

Credit is an important tool in today's economy. Access to affordable credit can make it possible for a person to buy a home, get a reliable vehicle, start a business, purchase assistive technology or pursue an education. The impact of COVID-19 spotlighted the need to have emergency savings and access to credit to pay for unexpected expenses like sheltering in place, grocery delivery or private transportation services. An unforeseen medical emergency or change in employment may require the use of credit to cover pressing needs until things stabilize.

Americans with disabilities are the most vulnerable in times of crisis and, overall, have less access to credit than those without disabilities—though access to credit may be crucial to their well-being. Individuals with disabilities are less likely to have a credit card, according to National Disability Institute research, and are more likely to use high-cost services (such as pawn shops and payday loans) to meet immediate needs like paying a bill on time. These services not only cost people more than conventional financial services, but they do not help people develop credit or take the necessary steps to qualify for credit. In fact, more than half (55%) of people with disabilities could not come up with $2,000 in an emergency, compared with 32% of those without disabilities.

How Can Credit Affect Your Finances?

Having a poor credit history, or a credit history insufficient to generate a credit score (a "thin" credit file), can result in a person incurring higher expenses. Credit scores (typically ranging from 300 to 850) are calculated based on detailed information in consumer credit reports maintained by the three major credit reporting agencies: Experian, TransUnion and Equifax. The credit score used by 90% of top lenders is the FICO® Score .

A less-than-stellar credit history or low credit score affects not only access to affordable credit, but also the ability to be approved for an apartment or cellphone contract. And those with low or no credit scores may be required to pay a security deposit on utilities. In many states, insurance companies may use a credit-based insurance score when setting premium rates for renters, homeowners and auto insurance.

A person's credit score can have a big impact when purchasing something like a vehicle or a home. For example, someone who has a higher credit score may qualify for an interest rate of 3.625% on a $200,000, 30-year fixed-rate mortgage, meaning the monthly payment would be $912. On the other hand, a person with a lower credit score may only qualify for an interest rate of 4.125%, meaning a monthly payment of $969 on the same $200,000 fixed-rate mortgage. Over a 30-year mortgage, that adds up to $20,590 more in interest costs over the life of the loan.

Employers cannot access credit scores for applicants or employees but, in some states, they may use an employment-screening version of a credit report to consider an applicant's credit history when hiring. This is especially common for jobs that require handling large amounts of money or sensitive information. Credit history may be a factor in qualifying a person for a higher-paying job that requires a higher degree of security; good credit is a big factor in those types of situations.

People With Disabilities and Access to Credit

Research reveals that adults with disabilities are credit constrained beyond what would be predicted by their socioeconomic characteristics.

People with disabilities need opportunities to practice money management skills and build their confidence. This can help support their pursuit of education, leading to meaningful employment and the ability to take steps toward planning for financial well-being, saving regularly and using credit to leverage their savings.

Education, employment and personal support services can help by integrating financial education services. Such activities not only support participants, but produce better outcomes for service providers' programs.

National Disability Institute created the fact sheet Disability, Race and Ethnicity: Inequality in Access to Bank Credit using data from the 2019 FDIC Survey of Household Use of Banking and Financial Services. This fact sheet calls attention to the inequalities in bank credit experienced by those with disabilities. Recognizing the impact of intersectionality, the findings highlight the disproportionate financial barriers faced by Black, Indigenous and people of color (BIPOC) persons with disabilities.

Specifically, the fact sheet explores characteristics of households classified as having an unmet need for credit, which means it meets one or more of the following criteria:

  • The household used a nonbank credit product, such as a payday loan
  • The household was denied a Visa, MasterCard, American Express or Discover credit card or a personal loan or line of credit from a bank (or not given as much credit as requested)
  • The household did not apply for a Visa, MasterCard, American Express or Discover credit card or a personal loan or line of credit from a bank because of concerns about being turned down

The percentage of households with a disability with an unmet need for credit decreased from 23.5% in 2015 to 20.7% in 2017, though the percentage remained at 20.7% in 2019. In 2019, the percentage of households with an unmet need for credit was 1.7 times greater in households with a disability than in those without disability: 20.7% and 12.1%, respectively.

Regardless of race or ethnicity, higher percentages of households with a disability have an unmet need for credit:

  • Black with a disability: 21.8%
  • Black without a disability: 19.8%
  • Latino with a disability: 22.5%
  • Latino without a disability: 16.8%
  • White with a disability: 20%
  • White without a disability: 9.3%

However, more people with disabilities now have bank accounts. The unbanked rate for people with disabilities decreased from 18.1% to 16.2%, according to recent FDIC data.

This data serves as a baseline of where we are now and how the integration of financial education can improve the financial wellbeing of adults with disabilities and positively impact the diverse communities in which we all live.

To find resources on how individuals with disabilities and their families can work to build their financial resilience visit National Disability Institute's Financial Resilience Center.

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