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President Biden’s Plan To Change Credit Reporting And Scoring

Michelle Black
Caroline Lupini
Forbes
"Black and Latinx borrowers [are] more likely to be denied credit than white borrowers and more likely to be charged higher interest rates [...]. It’s just one of many ways the financial deck is stacked against Black and brown consumers.”

The push for a public credit reporting agency is part of President Biden’s job and economic recovery agenda. The president’s agenda is inspired by a proposal from Dēmos, a liberal think tank with offices in New York and Washington, D.C. It calls for the formation of a new, national credit reporting and scoring division inside the Consumer Financial Protection Bureau (CFPB). [...]

Amy Traub, associate director of policy and research at Dēmos, said that although credit scores never formally take race into account, that doesn’t mean they’re race-neutral. “[Credit scores] draw on data about personal borrowing and payment history that is shaped by generations of discriminatory public policies and corporate practices.”

Many studies indeed show that Black and Latino consumers (as a group) have lower credit scores than their white and Asian counterparts. A CFPB study from 2015 found that those same Black and Latino consumer groups are also more likely to have no credit scores at all—known as being credit invisible.

“…Black and Latinx borrowers [are] more likely to be denied credit than white borrowers and more likely to be charged higher interest rates on everything from home mortgage loans, to credit cards, to car loans,” Traub said. “It’s just one of many ways the financial deck is stacked against Black and brown consumers.”

Read more at Forbes