![]() These three digits–and our continued endorsement of the status quo–are all that stand between tens of millions of Black and brown families from participating in the American dream. Despite the law, government regulators in 2013 caught one now-dissolved Maryland bank charging Black and Latino mortgage applicants millions of dollars in higher rates for no other reason than race.Ĭredit scoring just doesn’t add up. The study found that borrowers of color were offered higher rates when applying in-person and online. And when they are approved, they often pay higher rates and fees even when adjusted for creditworthiness.Ī 2019 study of nearly 7 million 30-year mortgages by the University of California at Berkeley found that Black and brown borrowers were charged higher rates, at an average of almost 0.08%, and steeper refinancing fees than whites. In 2022, Black mortgage applicants were denied at a rate 84% higher than white borrowers. Owing to the enormous knock-on consequences of historical racism, Black consumers are at once underserved and overcharged by mainstream financial services. Incumbent commercial lenders have no reason to change the status quo because it serves their bottom line. According to a recent Consumer Financial Protection Bureau report, these “credit invisibles” are predominantly Black and Hispanic consumers living in low-income neighborhoods where mainstream financial services are few and far between. ![]() At the same time, an additional 21 million Americans have no credit history with any national reporting agencies. In contrast, only 37% of white Americans reported the same sub-optimal scoring in a 2021 survey. Why? Our broken credit scoring system excludes and punishes people of color.Ĭredit scores range from 300 (poor) to 850 (excellent), with 54% of Black consumers reporting having a poor or fair credit score of 620 points or less. Sixty years after federal law barred lenders from denying credit based on a person’s race or where they live, America’s homeownership gap remains virtually untouched. Instead of removing race from lending, credit scores have become a direct proxy for it. However, the algorithms (and the underlying data that feed them) have been corrupted by generations of systemic oppression and financial exclusion of people of color. Your credit score is the shadow you never asked for and can’t outrun. Today, it’s the financial fingerprint used by lenders to assess the risk of default, by employers to evaluate the reliability of job applicants, by landlords to screen tenants, and by insurers and utilities to set rates. This opaque, three-digit scale was conceived as a race-neutral, data-driven measurement of a person’s creditworthiness.
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