Winston-Salem Journal, October 25, 2020, Michelle Singletary: Credit Scores Are Supposed To Be Race-Neutral. That’s Impossible.
The article uncovers the discriminatory misconceptions of the Black community being financially irresponsible due to their disproportionately lower credit scores. But when this misconception was traced back to its root source it was found these poor credit scores were due to systemic discriminatory practices which can be seen in racism in face-to-face application process.
Look at the calculation of credit scores, which help lenders assess risk when granting credit, insuring autos or deeming someone responsible enough to rent an apartment. Credit scores typically go from 300 (bad) to 850 (excellent). The most widely used is the FICO. Its chief rival is VantageScore, a scoring model that is a joint effort by the three major bureaus – Equifax, Experian and TransUnion.
Before the advent of the three-digit credit score, a consumer loan depended in large part on a face-to-face application process. What stood between you and a home or auto loan was a White male lending officer. This is why my grandmother was obsessive about her bill-paying habits.
The credit score is supposed to eliminate bias. The 1974 Equal Credit Opportunity Act barred credit score systems from using such information as sex, marital status, national origin, religion – or race.