In its bombshell of a report “Discrediting America,” the nonpartisan public policy research group Demos sums up the problem for black and Latinos:
Credit reports largely mirror racial and economic divides, with African Americans and Latinos disproportionately likely to have lower scores. In turn, these communities are more likely to be offered high-priced loan products, which may contribute to more defaults, maintaining and amplifying historical injustice.
“It’s like living in a prison without walls,” says Amy Traub, a Demos senior analyst who co-authored the study. “Using credit reports this way is like taking inequity in one realm and expanding it into another. If your community is full of unsafe and unfair loan products, that can affect your job prospects. You can [easily] get caught in this cycle of bad credit.”