Economic inequality in the United States is frequently measured in terms of income, wealth or educational outcomes. Yet one of the most persistent and least visible dimensions of economic exclusion lies in a household’s access to credit. Credit, which is often misunderstood as a matter of individual responsibility or financial literacy, is in fact a form of economic infrastructure. It enables mobility, cushions shocks and unlocks opportunity. Where it is missing, economic fragility festers.

Unlike visible indicators such as employment or GDP, credit access operates quietly, shaping who can start a business, move neighborhoods, weather medical bills or invest in a child’s future. Without it, even periods of macroeconomic growth can deepen disparities rather than narrow them. As the US debates the tools for economic justice and resilience, a new metric, the Credit Insecurity Index, offers a sharper lens into where exclusion is concentrated and how it may be overcome.

Diagnosing hidden fragility

According to the Federal Reserve Bank of New York report, the Credit Insecurity Index, which was developed using longitudinal credit bureau and demographic data from 2007 to 2018, classifies US counties into five levels of credit health. But unlike traditional indicators that rely solely on credit scores or banking status, the Index identifies those who are credit-invisible, underbanked, overleveraged or functionally excluded from the financial mainstream. This multi-dimensional view captures communities where credit exists only in name — fragile, predatory or prohibitively expensive.

Its findings are sobering. Roughly 23% of counties experienced a decline in credit security between 2007 and 2018. Another 1,700 counties failed to improve their credit tier, even amid historic economic expansion following the Great Recession. Most strikingly, 286 counties remained trapped in the most credit-insecure category, with no upward mobility in over a decade. These are not aberrations. They are structural conditions, geographically embedded and systemically reinforced.

Mapping the divide

The spatial pattern of credit insecurity complicates the conventional wisdom that financial exclusion is simply a rural or impoverished phenomenon. While Southern states such as Mississippi, Louisiana, Arkansas and parts of Oklahoma are overrepresented among the most credit-insecure, urban pockets — including Baltimore, the Bronx and parts of Philadelphia — also rank among the lowest in credit health. These areas share a legacy of redlining and financial exclusion.

Conversely, counties in New England, the Upper Midwest and Mid-Atlantic states, such as Vermont, Minnesota and New Jersey, frequently score highest. These regions benefit from denser banking networks, higher average incomes and stronger local safety nets. Importantly, this map reveals that credit insecurity is not reducible to poverty rates or unemployment figures alone. Rather, it reflects the strength — or absence — of local financial ecosystems.

Growth without inclusion

Between 2012 and 2018, macroeconomic indicators painted a rosy picture: falling unemployment, rising wages, soaring asset prices. Yet the Credit Insecurity Index reveals a parallel reality — one in which millions of Americans remained disconnected from the tools of financial recovery. In the most credit-insecure counties, credit scores stagnated or fell, access to mainstream lending remained scarce and debt in collections rose. Many residents had to resort to high-cost alternatives such as payday loans, pawn shops and subprime auto credit.

This decoupling of national recovery from local financial resilience underscores a central point: Growth is not synonymous with inclusion. Without deliberate investment in financial infrastructure, economic expansions simply widen the gap between the financially secure and the financially marginalized.

Credit, entrepreneurship and CDFIs

For decades, entrepreneurship has been upheld as a powerful pathway to economic advancement, particularly among low- and moderate-income communities. But credit insecurity undermines this promise. Research conducted in partnership with five Community Development Financial Institutions (CDFIs) — covering over 22,000 small business borrowers — offers a nuanced picture of post-loan financial health.

Key findings include:

1. Improvement in personal credit scores post-loan, particularly among those with initially low scores
2. Increases in consumer debt, suggesting entrepreneurs often supplement business loans with personal credit
3. Growth in business credit score creation
4. A rise in business credit delinquencies, reflecting heightened risk and thin margins These findings highlight a complex duality: credit access provides a crucial lifeline, but without adequate support structures, it can expose entrepreneurs to new forms of risk.

CDFIs play a critical role in addressing these structural credit gaps. Their mission is to serve communities overlooked by traditional finance, which puts them in a unique position to foster both entrepreneurship and financial inclusion. The US Treasury’s CDFI Fund supports this work by providing capital grants that expand lending capacity, especially in economically distressed areas.

Data show that after receiving financial support, CDFIs increase their lending activity in low-income communities. While modest rises in delinquency rates accompany this expansion, the overall impact is consistent with responsible risk-taking in historically excluded markets. In rural areas particularly, CDFIs are often the sole providers of capital and advisory services. Yet they face challenges scaling operations, especially amid staffing shortages and outdated digital infrastructure.

From index to action, resilience to equity

What makes the Credit Insecurity Index so powerful is not just what it measures, but what it makes visible. Policymakers often rely on unemployment data, poverty statistics or income figures to target investment. But these measures do not always capture financial vulnerability or credit risk exposure. The Index fills this gap.

Cross-referenced with health, education and broadband data, the Index exposes areas where financial stress and poor infrastructure overlap. It helps target credit-building, fintech and support services that build lasting resilience. As Community Reinvestment Act reform advances, the Index offers a sharper, place-based tool to guide action.

Resilience is often defined as the capacity to bounce back from shocks. But true resilience is the ability to absorb shocks without being pushed further into precarity. That capacity is unequally distributed. Communities with strong credit access, robust local finance and institutional support recover faster from disasters and accumulate wealth over time.

By contrast, credit insecurity makes households brittle. A layoff, medical emergency or vehicle breakdown can spiral into long-term financial ruin. These dynamics are part of a broader cultural and institutional divergence: While some nations actively promote savings and credit discipline, the US has long tolerated and even encouraged credit-based consumption models. As Professor Sheldon Garon notes, America’s approach to household finance reflects a deep-rooted deviation from global norms, where public policy plays a larger role in shaping savings behavior and consumer protections.

Uproot credit inequality with a new financial compact

If inclusive growth is our goal, we must reconceive credit not as a private good but as core infrastructure, essential to personal stability and national resilience. Just as we invest in roads or broadband, so too must we invest in the financial systems that underpin opportunity. 

But in the US, access to credit has long been shaped by two deeply entrenched forces: inherited wealth and race. The ability to build credit, secure a loan or purchase a home is often tied to family assets passed across generations. Those born into wealth can leverage it — whether as collateral, co-signers or a financial safety net — while those without it face steeper, often insurmountable, barriers. These divides are not just economic; they are racial. From redlining and exclusionary lending practices to today’s algorithmic biases in credit scoring, communities of color have consistently been denied the tools of financial mobility.

Access to credit should not be dictated by ZIP code, inherited wealth or race. It should be a shared foundation, equitably distributed and structurally guaranteed. The Credit Insecurity Index equips us to move from abstraction to action.

A new financial compact is not charity — it is nation-building.

[Lee Thompson-Kolar edited this piece.]

The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy.