| Black
families
have
10
times
less
wealth
than
whites
and
the
gap
is
widening—here's
why
CNBC
Jennifer
Streaks
What
is
happening
is
that
ongoing
racial
inequality
has
led
to
credit
inequality.
The
current
credit
scoring
model
ends
up
eliminating
many
African-Americans,
Latinos,
and
young
people
that
are
otherwise
credit
worthy,
making
them
in
effect
"credit
invisible."
Credit
invisibility
leaves
a
person
unable
to
access
necessities,
since,
besides
homeownership,
credit
is
used
when
a
person
applies
for
health
insurance,
car
insurance,
and
even
employment.
When
a
person
is
credit
invisible,
it
becomes
harder
for
them
get
started,
or
to
move
forward
after
and
respond
to
life's
challenges.
"There
needs
to
be
an
alternative
scoring
model
to
judge
credit-worthiness,"
says
Scott.
That's
why
he
has
introduced
the
Credit
Score
Competition
Act,
which
would
create
an
alternative
model
for
credit-worthiness
that
would
include
consistent
payments
for
rent,
utilities
and
cell
phones.
"With
gentrification
and
an
increasing
shortage
of
affordable
housing,
no
one
can
afford
to
be
'credit
invisible.'
Having
access
to
credit
is
like
having
access
to
a
better
life
and
if
minorities
are
being
denied
that
because
of
the
current
system
then
other
ways
of
ensuring
access
must
be
employed,"
he
says.
[…]
As
Scott
puts
it,
"It
is
imperative
that
minority
applicants
start
to
fare
better
when
trying
to
gain
credit.
If
a
person
is
credit-worthy,
they
should
have
access
to
credit
at
the
same
rate
as
everyone
else.
It
is
the
only
way
we
can
all
move
forward."
U.S.
Senator
Tim
Scott’s
(R-SC)
bipartisan Credit
Score
Competition
Act
was
introduced
last
year,
aiming
to
update
credit
scoring
models,
to
help
create
an
alternative,
more
fair
model
for
credit-worthiness.
The
Credit
Score
Competition
Act
directs
the
Federal
Housing
Finance
Agency
to
create
a
process
by
which
new
credit
scoring
models
can
be
validated
and
approved
for
use
by
Fannie
Mae
and
Freddie
Mac
(GSEs)
when
they
purchase
mortgages.
Currently,
the
GSEs
are
mandated
to
consider
a
decades-old
credit
scoring
model
that
does
not
take
into
account
consumer
data
on
rent,
utility,
and
cell
phone
bill
payments.
The
exclusion
of
these
data
disproportionately
hurts
minorities
and
first-time
homebuyers.
For
example,
In
South
Carolina
alone,
only
77%
of
adults
can
be
scored
under
the
model
currently
used
by
the
GSEs.
An
additional
16%
of
South
Carolinians
can
be
scored
under
newer
credit
scoring
models
in
the
market.
###
|