The Black Informant | African American Commentary, News and Community Building

The usage of credit scores to determine weather or not a person has a demonstrated history of paying on time is nothing new. Contrary to what the following press release suggests, folks of ALL racial backgrounds have been granted or denied credit based on their credit score. So why is this considered “news”?  In the meantime, I will just give you an excerpt (as always, you are encouraged to read it in its entirety here)

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National Black Caucus of State Legislators Issues Groundbreaking Report -

WASHINGTON and DENVER, Jan. 9 /PRNewswire-USNewswire/ — The National Black Caucus of State Legislators (NBCSL) today released a study conducted by the University of Denver Center for African American Policy demonstrating how credit scores are used to deny African-Americans and other minorities access to credit and financial services.

This study breaks new ground by using location mapping and statistical correlation techniques to examine the disparities in accessing mainstream financial services and credit products. These maps overlay credit scores (also known as FICO scores), race, income, employment, ethnicity and other

variables with the availability of traditional banking and fringe financial institutions in those communities.

“Credit scores are a key enabler of wealth, but credit scores today are used in a way that denies minority and underserved communities access to the financial services and products they need. This study demonstrates that credit scores — more so than simply race or income or other variables — are the key factor, and minority communities are disproportionately affected,” said Mississippi state Rep. Mary H. Coleman, the immediate past president of the NBCSL.

[Black Informant:"Okay, why is that considered news?"]

“Our research found that, while banks site branches in minority and lower credit score communities, they do not provide the same access to their services as those in higher credit score communities,” said Coleman. “And, even worse, there is often no way for those trapped with sub-prime credit scores to establish a prime credit score — which would enable wealth creation.”

[Black Informant: "If the above verbiage boils down to banks not issuing loans to people with low credit scores, and they have already acknowledged in this PR that race is not the ultimate determining factor, again what makes this process "unfair" to Blacks? The only why this process seems "unfair" to us is because on the whole, Blacks tend to have poorer credit histories that Whites:

"Poor credit is another external factor affecting mortgage application rejections. A new Freddie Mac report, based on a survey of 12,000 households with incomes of less than $75,000, shows that 48 percent of blacks and 34 percent of Hispanics have poor credit histories, compared to 27 percent of whites. The disparity persists across all income levels: Black and Hispanic consumers are more likely to have poor credit than whites whether they earn less than $25,000 or nearly $75,000. It is not clear from the study why the disparity exists." (American Demographics, 11/99) ]

I was about to post more of this press release, but much of the “compelling” information they present tends to be very repetitive IMO.

I will be the first to tell you the countless number of times I have ranted offline over the sad state of the credit industry. My biggest frustration is the fact that our country uses 3 different credit bureaus and in many cases the data they collect is STILL inaccurate. Getting an account status changed or dropped can oftentimes be the equivalent of getting to the moon by bicycle. However, with much persistence and the knowing just who to contact to correct errors on your report, it can be done. The Internet is full of testimonies (and help) of folks who have been able to maneuver through the credit bureau cloud. On the other hand, accounts that YOU are responsible for creating can and should be dealt with. The problem here is that most people do not have the discipline it takes to improve their credit history. This process can take from weeks to years!!

But it can be done.

Simply stated, whites tend to have a much better credit rating because they have a much stronger history of learning how to manage it and understanding how it relates to building wealth. On the other hand, for the first time many of us are just learning how to manage wealth and the importance of maintaining a good credit history. While I believe that there are lenders out there who use color as a determining factor, the truth is that the only color most lenders are concerned with is GREEN. I have personally seen Black lenders as well as lenders of other races offer shady loan packages to Black folks. To these lenders, they see it as just trying to get “broke off”. It is up to us as consumers to do our homework and shop around for the best deal. Ignorance is not a case for racism.

To suggest that banking institutions are being unfair to use the current credit scoring system as a determining factor weather or not to issue loans as “unfair” is just plain asinine. Many of the Negroes that put this PR together know good and well that they themselves would not lend a dime to anyone who has a history of not paying off debts. So why expect banks to do it?

(As a side note, check out any of the 3-in-1 credit report and score online services out there as many of them offer information on how to not only improve your score, but will e-mail you anytime a change has been made to your credit report.)