Black neighborhoods have a median credit score that is 100 points lower than white neighborhoods, both across the US and even within the same city. That’s the difference between being considered subprime vs. prime.
Data Source: Urban Institute
The Path Forward
🙅♂️ Ban credit checks for employment — Research from economist at the Federal Reserve and Harvard Kennedy School shows that banning credit checks in the hiring process can increase employment for low-income Americans by 1.9–3.3%. These gains also tend to be in higher paying jobs. In 2019, the House Financial Services committee passed a bill that would do just this, but it died on the floor as Republicans argued the bill was too broad and that more data points were important in hiring. What you can do - if you’re involved in hiring, make sure that your employer doesn’t use credit checks since it may preclude minority or low-income candidates from getting hired.
💥 Penalize credit agencies for incorrect information — There is currently no fine that credit agencies experience for incorrect information, yet 1 in 3 Americans have an error on their credit report. If you find an error on your credit report, your only recourse is to call up the credit reporting agency and ask them to fix it. And even then the credit agency’s only legal requirement is to check-in with the provider of the faulty data. 1 in 5 Americans have a “potentially material error” in their credit reports and 8 million times per year consumers contact the agencies about these complaints. The National Consumer Law Center has referred to this complaint process as “the Kafka-esque automated dispute system used by the credit bureaus.” Yet without money on the line or skin in the game, errors will persist, people will have erroneously incorrect credit scores, and consumers will be responsible for realizing and fixing the issues thrust upon them.
✅ Check your credit score today — On AnnualCreditReport.com you can get a free credit report. Under The Fair and Accurate Credit Transactions Act (FACTA, 2013) every person in the US is authorized to get one free credit report every year without any penalty for checking. Equifax, Experian, and TransUnion are the 3 credit agencies that determine your credit score and are required by FACTA to issue your credit report. If you know your score, if you can see your report, if you can correct any errors, then you maybe stand a chance to raise your score.