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How to address the racial credit score gap

Experian launched a new app - Experian Go - to tackle financial inequity and help those who have no credit build it


The effects of racial discrimination are apparent in all aspects of financial life, with people of color and white people operating on two uneven playing fields. New programs like Experian Go aim to reach people who have traditionally been excluded from financial systems by turning the traditional credit scoring method on its head.

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When it comes to credit and lending, it’s important to remember that the rights and protections afforded to all borrowers have not always been equal. Less than 50 years ago, there were no laws in place to discourage or prohibit banks from denying a Black applicant a credit card or loan based solely on the color of their skin.

In 2022, we expect equity from banks and are seeing increasing public awareness of inequity in financial services.

Just last year, a 2020 study found that Black applicants were 84% more likely to be denied a mortgage than white applicants in 2020 – up nearly 10% from 2019. It’s a startling statistic that is getting worse rather than improving.

Here’s what you need to know about the impacts of the racial credit score gap and how we can take steps to help the millions of Americans who are struggling to get a credit score.

The impacts of financial inequity on Black communities

The effects of racial discrimination are apparent in all aspects of financial life. The answer for how we got here is as simple as it is demoralizing. We got here after years of systemic racism and purposeful exclusion of Black people created a chasm in the financial industry that placed people of color and white people on two uneven playing fields.

As Mehrsa Baradaran, financial law professor at the University of California, Irvine, put it in her book The Color of Money: “The wealth gap is where historic injustice breeds present suffering…when Wall Street catches a cold, Harlem gets pneumonia.”

The primary reason that Black applicants were denied a mortgage was a low credit score or insufficient credit history. This fact alone shows that our credit and lending systems in the U.S. are broken and still exhibiting racial bias.

Before the 1974 Equal Credit Opportunity Act was signed into law, credit and lending were largely determined by face-to-face visits with bank employees and lending officers. This fact alone created a discrepancy between Black and white people when it came to being approved for credit cards, loans and mortgages. Add in redlining – the practice of determining someone’s financial viability based on the neighborhood they live in – and the reasons for the racial credit score gap become clear.

Though redlining and discrimination based on gender or race are both illegal, the National Community Reinvestment Coalition found that “While overt redlining is illegal today, having been prohibited under the Fair Housing Act of 1968, its enduring effect is still evident in the structure of U.S. cities.” This fact can be seen in all facets of finance in America, but it is particularly apparent in the racial credit score gap.

The racial credit score gap

A recent survey found that 54% of Black Americans reported having a poor credit score or no credit score at all. In contrast, only 37% of white Americans reported having no credit history. While Black people have historically been marginalized and excluded from the financial industry in the U.S., they are not the only people affected by inequity when it comes to credit. The survey also found that 41% of Hispanic Americans fall into the same category.

The credit score gap creates an inescapable loop of hardship for many people of color. To get a good credit card, fair loan or a mortgage, you need a good credit score. To get a good credit score, you need to have a healthy credit history. This cyclical problem has led to tough financial choices for many people in marginalized communities, such as taking out high-interest loans from predatory lenders or applying for credit cards that offer them little benefit.

New programs like Experian Go aim to reach people who have traditionally been excluded from financial systems by turning the traditional credit scoring method on its head.

Inequity has become so vast that systemic change is needed in our current credit system. One way of achieving this is to allow people to create their own credit report and factor in everyday bills and expenses that haven’t been considered. While this may seem like a small change, for communities experiencing financial inequity, just getting to the starting line could be a huge step forward.

What is Experian Go?

Experian Go is an app, launched by Experian in January 2022, that aims to help create a credit history for people who would otherwise have no credit score or history. Also known as “credit invisibles,” people without a credit score can use Experian Go both as a tool to create a credit report and as a longer-term educational journey.

Rod Griffin, senior director of public education and advocacy for Experian, was part of the team that created the Experian Go app. As he explains, “We know that there are about 28 million people in the U.S. with no credit history and that traditional ways of creating a credit history like being added as an authorized user on someone else’s account, opening a secured account, getting a credit card or a loan doesn’t work for everyone. Being able to create a report proactively is critical for people who don’t have the ability to be associated with an account.”

In tandem with the Experian Go program, people looking to build their credit history can also use Experian Boost to factor in everyday bills such as cell phone payments and utilities to create a credit history.

Experian Go is free to use and was created with the community it wants to serve in mind. “The reason it [Experian Go] is app-based rather than web-based is because we know from our research that while people who are credit invisible may not have access to a computer, everyone has a smartphone,” explained Griffin.

What to do if you are struggling to create a credit history

If you’re having a hard time starting your financial journey, you’re not alone, and programs like Experian Go and Boost could be a good place to start building a foundation to grow your credit score.

Another option to consider is applying for a secured credit card to build up your credit history. Secured credit cards don’t require a good credit score or lengthy credit history to qualify for, making them ideal for the beginning phase of your financial journey.

It’s important to know that a secured credit card will require a deposit to use. The deposit amount can range but is typically a few hundred dollars. This deposit will serve as your credit limit, and if you pay off your balance every month, it should be returned to you when you choose to close or upgrade your account.

If you don’t want to apply for your own credit card, another way to build your credit history is to be added as an authorized user to a credit card owned by a family member.

If you want to avoid credit cards altogether, the journey to a good credit score may take a little longer, but it isn’t impossible. “We have found that 91% of people who are able to add Experian Boost data to their credit report on average get a score of 665. It’s a great starting point,” explained Griffin.

Bottom line

When it comes to credit and lending in the U.S., we have a long road to financial equality ahead. Progress is happening, but narrowing the racial credit score gap will take a targeted effort from the very industry that excluded people of color with such devastating results.

We have a long history of telling the poorest in our society to “pull themselves up by their bootstraps,” but that becomes hard when you consider that people of color have been denied the proverbial shoes altogether. Programs like Experian Go are a step in the right direction to get people without a credit score to the starting line, but long-term change to the credit industry is the only way to even the playing field.

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The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

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