Record-level credit card debt and fluctuating incomes create financial challenges for many American households, especially those with lower incomes. The effects may be felt especially keenly in black households, where historic and systemic racial discrimination has led to greater disparities in wealth and debt.

But there are moves that families facing such hardships can make to better their finances, including improving their credit profile and seeking alternatives to risky products such as payday loans.

DEEPLY ROOTED DISPARITIES IN DEBT AND WEALTH

Disparity in wealth and debt feed into one another, says Pamela Chan, project director of human insights at Prosperity Now, a nonprofit based in Washington, D.C.

“If you are a person who doesn’t have a lot of wealth to start from … then when emergencies hit, that often causes someone to lean on debt to get through those periods,” Chan says. “Then once someone takes debt, if they don’t have wealth, they’re much more vulnerable if something happens when they’re trying to pay off their debt.”

Institutional discrimination against generations of black Americans and its far-reaching consequences have contributed to black households facing greater financial hardship than white households, Chan says.

The wage gap is one example. As of 2015, black men made 22 percent less than white men with, for example, the same education, experience and region of residence, a 2016 report from the Economic Policy Institute found.

In 2016, the median wealth of white families was almost 10 times the median wealth of black families — $171,000 compared to $17,600 — according to the Federal Reserve’s 2017 Survey of Consumer Finances .

HOW TO IMPROVE FINANCES TO BUILD WEALTH

Reducing debt is the first step toward building wealth. Before taking action, Michigan-based accredited financial coach Weslia Echols recommends planning a long-term strategy.

“The first thing I ask people to do is take a deep breath. When you do that, and assess the situation fully, you won’t look for a quick answer like a payday loan,” Echols says. “Getting out of debt is a long-term process.”

Echols recommends establishing a clear budget and payoff plan. Here are tips to improve your financial profile.

—BUILD YOUR CREDIT: Your credit report and score are among the most important aspects of your financial life. When they’re in the best shape possible, you become more appealing to lenders, increasing your access to credit at lower interest rates.

Start by checking your free credit reports at annualcreditreport.com for erroneous information, like an account that’s not yours that could be lowering your score.

Then start raising your score by making on-time payments on all accounts, including credit cards and loans; payment history is the largest single factor affecting it. The credit bureau Experian advises keeping your credit utilization — or how much of your credit limit you use — below 30 percent.

—BE STRATEGIC ABOUT DEBT: The 2017 Survey of Consumer Finances shows that black families are more likely to carry debt-to-income ratios — that’s how your debt compares to your income — greater than 40 percent, a marker of financial distress, according to the Federal Reserve. Nine percent of black families had DTIs above 40 percent, compared to 6 percent for white households.

Manage your debt as cost-efficiently as possible and pay it off faster by lowering your interest rate. Transferring the balance to a zero-interest credit card is an option for borrowers with solid credit.

If you don’t qualify for such a card, look into whether a debt management plan can help you pay down your credit card debt faster and cheaper. If your monthly debt payments exceed half your income, you may want to seek legal advice on whether bankruptcy makes sense for you. Though it doesn’t erase all types of debt, it can offer a fresh start and help you meet other financial goals, such as saving for retirement. Resources like LawHelp.com can point you to local legal aid.

—AVOID RISKY PRODUCTS: Thirty-nine percent of black Americans are likely to use high-interest loans, like payday loans, compared to 21 percent of white Americans, according to a 2016 report from the Financial Industry Regulatory Authority. These loans can carry interest rates upward of 300 percent and lead to repeat borrowing, trapping the borrower in a cycle of debt.

If you need cash, you can find better loan rates at a local credit union. And apps like Earnin can give you an advance on your paycheck without fees or interest. If you have poor credit, a credit builder loan — also available at many credit unions — can provide the cash you need while you improve your credit.

For more help, tap the free advice of a nonprofit, like the National Foundation for Credit Counseling.

This article was provided to The Associated Press by the personal finance website NerdWallet. Sean Pyles is a writer at NerdWallet. Email: spyles@nerdwallet.com.

RELATED LINKS:

NerdWallet: 3 steps to paying off your debt

https://nerd.me/steps-pay-off-debt

Federal Reserve: Recent Trends in Wealth-Holding by Race and Ethnicity: Evidence from the Survey of Consumer Finances

https://www.federalreserve.gov/econres/notes/feds-notes/recent-trends-in-wealth-holding-by-race-and-ethnicity-evidence-from-the-survey-of-consumer-finances-20170927.htm

Economic Policy Institute: Black-White Wage Gaps Expand with Rising Wage Inequality

http://www.epi.org/publication/black-white-wage-gaps-expand-with-rising-wage-inequality/

LawHelp.com

https://www.lawhelp.org/find-help/