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Is The Credit Score System Holding Black People Back? Dr. Bernice King and Ashley Bell Think So

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April 28, 2023
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A new article in Fortune by Dr. Bernice King, the youngest child of Dr. Martin Luther King, Jr., and Small Business Administration executive, Ashley Bell claims credit scoring is a consequence of slavery and segregation.

King and Bell put forth the ideology that the credit scoring system leads to systemic oppression and puts people of color in difficult financial situations. Instead of lenders removing race, credit scores have become a direct proxy for it.

Credit scores range from 300 (“poor”) to 850 (excellent”). According to Credit Sesame, more than half of Black Americans report having poor or fair credit, referred to a credit score below 640, or no credit at all.

Forty-one percent of Hispanic Americans and 18% of Asian Americans fall into the same category over white Americans, who stand at 37%. The Consumer Financial Protection Bureau issued a report stating “credit invisibles” are predominantly Black and Hispanic consumers living in low-income neighborhoods where mainstream financial services are scarce.

Today’s credit score system is designed to eliminate bias. Forbes Advisor reported in 2021 the Equal Credit Opportunity Act in 1974 banned credit-score systems from using information like sex, race, marital status, national origin and religion. Today, FICO looks at payment history, amounts owed, length of credit history, new credit and credit mix in its model.

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Experts like Frederick Wherry, professor of sociology and director of the Dignity and Debt Network at Princeton University, say that type of data can be influenced by generational wealth that many Black and Hispanic borrowers simply don’t have.

“We’re often told to stop talking about history, but history won’t stop talking about us,” told Forbes Advisor. “The data used in current credit scoring models are not neutral; it’s a mirror of inequalities from the past. By using this data we’re amplifying those inequalities today. It has striking effects on people’s life chances.”

King and Bell even called out corporations, including financial institutions, who, after the death of George Floyd and other police brutality protests, have announced pledges toward economic equity initiatives.

“One of the easiest and most potent levers corporate America can pull is to abandon the junk science of credit scoring,” the authors write.

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