The Equity Factor

How Gentrification Can Affect Your Credit Score

New study looks at displacement and economic segregation in Philadelphia.

Love Park in Philadelphia (AP Photo/Matt Rourke)

Gentrification hasn’t forced out as many residents as one might think, according to a new study by the Federal Reserve Bank of Philadelphia. Rather, after assessing financial health in residents from 2002 to 2014, researchers found that the number of people moving from gentrifying neighborhoods into pricier, higher-income areas was higher than those who moved due to economic pressures.

Still, their findings didn’t leave much to celebrate. When homing in on financially disadvantaged movers, research revealed that these residents often moved to worse-off areas with poorer quality-of-life indicators. Their research also points to a trend of an economic stratification across the city, suggesting that today’s Philadelphia is economically segregating.

A popular quote on how tough displacement is to track compares it to “measuring the invisible.” Data miners are essentially looking for people who’ve abandoned the research base. Household surveys often favor here-and-now questions, rather than queries that could outline residential history. What makes this Federal Reserve Bank study different, and this hard-to-track group more perceptible, is the use of credit score analysis. The researchers turned to data from the Federal Reserve Bank of New York Consumer Credit Panel to produce a picture on individual financial health. Through this lens, researchers divided mobility patterns by low-score movers and high-score movers. Now, a low-score mover might include, co-author Eileen Divringi, points out, a millennial who at one time fell behind on student loans. Divringi and her peers also folded in data on degree attainment, home value, rent price and household income for their greater analysis.

“We found fairly compelling evidence that a lot of demographic change in gentrifying neighborhoods was driven more by the changes in who was able to move into those neighborhoods,” Divringi says, reflecting on which takeaways could be appreciated from a national perspective. “Ours is the first study that’s really been able to track where individuals are moving. A lot of prior studies had found that financially vulnerable residents weren’t necessarily more likely to move … [but] the picture was somewhat limited there.”

For all the challenges on researching gentrification and its impacts, there have plenty of recent reports on the topic, with widely varied findings. One institute may view it as a good financial omen for longtime residents thanks to re-investment; another may contend that the pressures of rising prices in retail and services are straining the poor. This Fed study actually bore varied results between neighborhoods — evidence, perhaps, that while the codes of gentrification might have a similar ring everywhere, it doesn’t actually develop identically from place to place.

For example, Philadelphia’s River Wards, a group of neighborhoods that can’t seem to shake hackneyed comparisons to Williamsburg and Bushwick, actually boast considerable rates of homeownership. The authors found that Philadelphians with mortgages weren’t more keen to move. In many cases, low-score movers in the River Wards relocated to neighborhoods similar to ones they were leaving.

Compare this to the gentrification seen in Center City and West Philadelphia, areas with fewer homeowners, where low-score movers tended to end up in areas with higher unemployment, lower home values and poorer quality of life.

West Philadelphia holds some the of the most sought-after neighborhoods in the city, but not everyone was downgrading. Movers in this section left for more favorable settings overall, researchers found. The poor outcomes were limited here to the economically vulnerable.

The researchers noted that neighbors who stayed put saw their credit scores improve, the highest jump recorded in areas with the most gentrification (an average 23 points over the course of three years). Among those who moved though, results were “uneven.”

A common gentrification question has been: But where are the displaced moving to? The following maps from that study finally provide a response to this. Each dot represents an individual move (someone who has bounced around would be recorded more than once); green stands for high-score movers and red for low-score ones. High-score movers often went to places that were easy to predict, like University City (where Penn and Drexel are) and the suburbs. Low-score movers were dispersed throughout the city, more likely to reach neighborhoods farther out from the core. Many South Philadelphia neighborhoods saw low-score and high-score movers sharing newfound space. (Divringi says this may suggest housing diversity in those tracts.) But more high-score movers wound up closer to the city core, and if there was one common destination for the displacement, it was the lower, west portion of South Philadelphia.

Destination tracts of movers from gentrifying neighborhoods, 2003–2014, high-score (Calculations use data from the FRBNY Consumer Credit Panel/Equifax. U.S. Census TIGER/Line Shapefiles)

Destination tracts of movers from gentrifying neighborhoods, 2003–2014, low-score (Calculations use data from the FRBNY Consumer Credit Panel/Equifax. U.S. Census TIGER/Line Shapefiles)

Low-score renters who moved often went to areas with higher crime, worse schools, and, at the top of Divringi’s list during our interview, fewer jobs and higher unemployment rates. The research also hints that poorer neighborhoods may be becoming less white. If anything, one of the lead takeaways is the need to focus on polarizing effects on access and opportunity between communities.

“Because [these] neighborhoods were no longer accessible or affordable to those residents, you sort of have an indirect displacement, almost by attrition over time,” says Divringi.

Divringi’s comment is forward-looking. The study suggests that the greater loss is perhaps not with people, but with potential for equity.

The Equity Factor is made possible with the support of the Surdna Foundation.

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Cassie Owens is a regular contributor to Next City. Her writing has also appeared at, Philadelphia City Paper and other publications.

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Tags: affordable housingincome inequalitygentrification

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