It’s called your “credit score”

Senior Editor | Dr. G.S. Potter

Let’s face it: These United States were not built on life, liberty and the pursuit of happiness. They were chained and nailed together through white supremacy, manifest destiny, genocide, and slavery.  All of these things were not only legal, they were and, continue being, celebrated. 

The first time Whiteness faced significant legal consequences was in the aftermath of the Civil War. Unable to control Black bodies through slavery, it soon evolved into the legally sanctioned shape of Jim Crow. As a result, Whiteness reestablished its claims on space and superiority through segregation, suppression, and sanctioned violence.  Then the Civil Rights Movement forced Whiteness to reshape itself once again. 

Whereas it was once legal to segregate cities, neighborhoods, banking systems, schools, lunch counters, buses, and water fountains explicitly by race, now Whiteness had to start working a little harder to draw lines between itself and the melanated.  And so it went back to the drawing board and strategized.

Finally, the supremacists came up with the perfect solution.  The end of segregation and the passage of the Civil Rights Movement made it illegal to discriminate by race.  No longer could Whiteness simply say “This is a White neighborhood” and “This is a Black neighborhood” anymore.  It had to find a way to say Black folks can’t live here, go to school here, drive a car here, and work here …. without saying the word “Black.” 

And so it did. 

In the search for the best way to avoid the legalities of racist language, Whiteness came up with the perfect counter: a number. More specifically, it came up with a score. Instead of using words like Black and Mexican and Indian to keep people from moving into White neighborhoods and going to majority-White schools, Whiteness evolved and in the late 1980s, it started using credit scores. 

So, now, Whiteness says …

• “You aren’t being kept out of this neighborhood because you’re Black. You just don’t have a high enough credit score.” 
• “You aren’t getting this loan because your number is 620.  It has nothing to do with race.” 
• “You can’t work here.  You’re a 598.  We’re looking for a White – … ahem, someone with a better credit score.” 

What makes it worse is that most of us are actually falling for this as non-racist, fair and a completely normal function of society. Organizations and policymakers who either introduce legislation to address it or finally call it out still seem to afraid to tackle it in any real aggressive way. Many of us think it’s perfectly right and that those in a lower credit score realm or irresponsible and less of a person. So, our public discourse evolved from being outraged that people of African descent who were enslaved in this country were once legally designated as three-fifths a human being to now accepting the notion that lower credit scores make you three-fifths less of a productive member of society or human being. Yeah, we sure came a long way. Or, maybe we’re just too afraid or proud or embarrassed or, literally, frightened to speak up about it.

A Black & Indigenous Credit Crisis

According to CNBC …

About 54 percent of Black Americans report having no credit or a poor to fair credit score, which is considered to be any score below 640, according to a recent survey of 5,000 U.S. adults by Credit Sesame. About 41 percent of Hispanic Americans report falling into this category as well.  

In a CreditCards.com Bankrate study, 46 percent of people who live in Indigenous communities and 45 percent of those in Black communities have subprime credit scores (580-619). The standard minimum credit score needed to secure rental housing is 650.   

If you aren’t assigned the right number, you can’t buy or rent a home in certain areas.  And if you can’t live there, you definitely can’t go to school there.  That is, essentially, segregation rebooted.  If you can’t qualify for a business loan or a car loan, you can’t access social or literal mobility.  Oppression? Check. If you can’t work, you are going to live in the hellscape of poverty at best, and you’ll end up incarcerated at worst. Dehumanization and disenfranchisement? Check and check.  

CNBC further reports that …

About 28 percent of those with poor credit say they can’t rent the apartment they want, while 22 percent have been denied a cell phone plan ….

More than half (53 percent) of all Americans have been rejected for a credit card, loan, or car due to poor credit. One in ten have been rejected from a job because of bad credit.  It’s a really effective system. And it’s about to completely reinvent itself.

The Credit Score Reformation

There is a battle for the credit score system that is beginning to take place between multiple stakeholders with competing ideas of how the system should be reformed.  On one end of the spectrum, there are those who say it must be abolished completely.  On the other end of the spectrum, there are those who want to expand it through algorithms, Artificial Intelligence, and social media monitoring. In the middle, there are factions that want to overhaul credit scoring in some way, shape, or form – but to a limited extent. 

Interestingly enough, intense debates over credit scores have been very recent, perhaps pushed by the massive disruptions in financial stability every demographic has experienced during pandemic. Still, these battles are largely taking place without the input or influence of the individuals most dramatically impacted by credit scoring.  While there are some people of color present here and there, it is, largely, still a very White dialogue. Whiteness would prefer to, of course, keep it that way.

Within this multi-front battle, there are two competing questions.  Those who understand the relationship between credit scores and racial segregation and stratification are asking: How do we keep credit scores from hurting us?  Those who want to exploit the credit system for their own gain are asking: How do we modify the system to expand our reach without upsetting the racial hierarchy the credit system was designed to uphold?

At a recent online discussion held by Axios, for example, Senator Tim Scott (R-SC) said it himself …

There are remedies that really level the playing field without reversing discrimination in any way shape or form.

Whiteness isn’t necessarily opposed to that model.  But, there are others that it prefers.

Revolutionizing the System: Social Credit

There are remedies on the table that seek to use credit in a way that completely solidifies and exacerbates Whiteness’s stronghold on everything from housing to education to employment. For example, at the most extreme end of the spectrum, the architects of credit are looking to bring algorithms, social media, and personal behaviors into their ability to segregate and exclude. China is already deploying such a model and using it against their comparable undesirables.

Wired reports …

China’s social credit system expands that idea to all aspects of life, judging citizens’ behaviour and trustworthiness. Caught jaywalking, don’t pay a court bill, play your music too loud on the train — you could lose certain rights, such as booking a flight or train ticket.

China blocked 17.5 million people from buying a plane ticket because they did not have enough social credit in 2018 alone. 

Business Insider similarly explains …

The exact methodology is a secret — but examples of infractions include bad driving, smoking in non-smoking zones, buying too many video games, and posting fake news online, specifically about terrorist attacks or airport security. Other potential punishable offenses include spending too long playing video games, wasting money on frivolous purchases, and posting on social media.

This form of credit reporting relies heavily on AI and algorithmic technology.  Both are already known to suffer from racial biases, and efforts are already being undertaken to prevent their use in credit scoring here in the United States. 

District of Columbia Attorney General Karl Racine, for example, has introduced the Stop Discrimination by Algorithms Act.  According to Racine,

… [A]lgorithmic decision-making computer programs have been convincingly proven to replicate and, worse, exacerbate racial and other illegal bias in critical services that all residents of the United States require to function in our treasured capitalistic society.

The Stop Discrimination by Algorithms Act would prevent algorithms from being used to gain access to “important life opportunities” such as education, housing, and employment. 

In 2019, New York passed a law banning credit reporting agencies from using social media in their credit scoring.  Other states have yet to follow suit, but considering the push for expanding the data pool from which credit scores are derived, now might be a good time to start drafting legislation. Social media has asymmetrically supported Whiteness to the point of a Confederate led insurrection on the capitol. The effects it could have on the economy could be devastating.  Especially to people who aren’t White.

Changing the Existing Formula

Other options include continuing to use the credit scoring, but in some ways changing how the scores are generated and what they can be used for.  Pro-credit advocates insist that bringing more people into financial lending systems would lead to more inclusiveness.  Credit-wary stakeholders want to curb their use in certain areas while allowing the system to continue. Both do little to confront the inherent bias the system itself generates. 

There are two categories of potential clients that the financial system wants to bring into the fold. 

• The first is people with invisible credit. 
• The second is people with thin or unscorable credit. 

Invisible credit is credit activity that is not reported to the credit bureau and so it isn’t included in scoring.  Rent, utilities, loan payments and insurance payments are all examples of credit activity that isn’t reported.  Having thin credit means that you don’t have enough credit to be scored. There are approximately 62 million Americans have thin credit and 26 million are credit invisible.

According to TransUnion president and CEO Chris Cartwright …

There are a variety of non-loan financial activities that we believe should be included in the modern credit reporting system in order to expand access to that system for the tens of millions of Americans who currently don’t have it.

One of the ways that people with thin and invisible credit can be brought into the fold is by changing the credit scoring mechanisms to include invisible credit.  Currently, rent and most bills don’t show up on a credit report unless they are reported to an agency for failure of payment.  Then they bring the score down.  Credit bureaus are considering using payments for rent, telecommunications, utilities, cable, and certain loans in such a way that consistent payment increases your credit score. 

On the surface, this might not seem like a bad idea, especially for people who have either philosophically bought into the system or have just given up to the idea that credit scores are a permanent function of society.  In fact, the finance industry is selling it as a move towards more inclusiveness. 

Unfortunately, just slightly altering the system would likely bring in more consumers for the financial industry, but it won’t alleviate the inequities that exist within the credit system. This failure would be replicated under normal circumstances, but in the midst of a pandemic, they are glaringly inefficient. 

As of this past fall, 15 percent of all renters, almost 6 million households, were behind on rent. And according to The Guardian …

Millions more Americans fell behind on utility bills during the pandemic. Utility debt increased from around $12bn before the pandemic to an estimated $32bn by the end of 2020, according to the National Energy Assistance Directors’ Association (NEADA).  

Nothing is being done to help these individuals and households recover, but much is being done to send them to collections, decrease their credit scores, and trap them in segregated communities where they are caged away from income and opportunity.  Sen. Scott and TransUnion’s plan to allow people in poverty to languish while cherry picking a privileged few to be exploited through the financial lending process is an attempt to exploit and exacerbate financial divides and devastation caused by the pandemic.  

Whiteness might approve, but more inclusion does not equate to greater protections.  Fortunately, there are other efforts seeking to balance inclusion with equality.

At the federal level, there are efforts that would alter the credit system in a way that curbs the damage it does to certain individuals and communities.  According to Boston.com, the Comprehensive CREDIT Act of 2020 introduced by Congresswoman Ayana Presley would include ….

… [M]easures to make it easier for the estimated 20 percent of consumers who have a “potentially material error” on their credit report to seek corrections; limit the use of credit scores for employment purposes; expand the opportunity for student loan borrowers to improve their credit scores; restore credit to victims of predatory agencies; ban the reporting of debt incurred from “medically necessary procedures” and delay the reporting of other medical debt; shorten the time that most adverse credit information stays on a report from seven years to four years, and from 10 years to seven years in the case of a bankruptcy; and bolster the Consumer Financial Protection Bureau’s oversight of the industry.

That bill passed in the House last year, but naturally stalled in the Senate. In June, Pressley then introduced the Comprehensive Credit Act of 2021, which still sits in the House with no co-sponsors. The White House also has plans to reform the credit system in efforts to better protect communities of color.

The Biden Administration is considering, in part, nationalizing the credit process.  The idea is that having a government agency serve as a credit reporting agency would prevent discriminatory lending practices and enable consumers to more easily clear errors on their reports.  Unfortunately, the administration has yet to lay out exactly how it would accomplish these goals.

The Whiteness hides in the details.  It is difficult to know whether the actions the administration may take would actually serve the communities most harmed by the credit system. Other options, though, are still available.

Just Destroy the Credit Score

Credit bureaus seem to conveniently ignore a very common-sense fact.  People with more money can afford to pay their bills on time. People with less money can’t always do that. That doesn’t mean that people in lower income brackets and with less wealth wouldn’t pay their debts off or accrue more credit if they had the money to do so, it just means they’ve never had the opportunity to do so. 

American Express reports that the average credit score for someone that makes $30,000 or less is 590. For an income between $30,001 – $49,999 the average score is 643.  And the average score for someone with an income of $50,000 – $74,999 is 737.  The median incomes for white, Latino, Black and Indigenous are approximately $50,000, $31,000, $35,000, and $34,000 respectively. 

Race predicts income which predicts credit score. You don’t need a degree in mathematics to understand that formula: Race ain’t nothing but a number and Whiteness wins again.

The most commonly used argument against abolition of the credit system is that without it, lending will be left to the individual biases of the lender. In other words, if we do away with the racist system, all we will have to turn to is a racist system. 

That’s not entirely true. 

There can and should be legislation that offers protections above and beyond what the Comprehensive CREDIT Act offers. Poor people should not be asked to pay more for utilities and phone bills because they are poor. That is what frequently happens to low income people trying to secure contracts for water, heat, electricity, and cell phone access. They might be allowed into the system, but they are penalized for it.  That makes it harder for them to get out of poverty and build better credit.  Close to half of the collective BIPOC community should also not be denied housing because they have credit scores below what is required to rent. There is no system that should prevent over half of the people of color in the United States from securing shelter. If we really want to create truly affordable housing, a good place to start would be through eliminating the use of credit in the rental housing market altogether. It can also be eliminated from utility and telecommunications access. 

There are also options for revolutionizing the credit system in such a way that being from a lower income is actually an asset.  The formula used to calculate a credit score could be weighted in such a way that if a lower income person pays their bills on time, then they get more points than if a more wealthy person did the same thing.  It is much harder for poor people to pay their bills. They should get, well, credit for it. 

Similarly, people should not be penalized for defaults when there is an emergency or a period of unemployment.  Credit bureaus could refuse to lower credit scores during a pandemic, for example.  Or they could be legally prevented from doing so.  Defaults related to other emergencies such as natural disasters could also be considered. 

Another option is to start collecting more data. The assumption again is that poor people won’t pay their debts, even when they can afford to.  This assumption should be challenged.  The MIT Technology Review suggests …

One option in the short term may be for the government simply to push lenders to accept the risk of issuing loans to minority applicants who are rejected by their algorithms. This would allow lenders to start collecting accurate data about these groups for the first time, which would benefit both applicants and lenders in the long run.

Whether we abolish the use of credit, adjust it, or allow it to enter a new technological era unchallenged, one thing is clear: This isn’t just a battle to reorganize the financial system. It’s a war to uphold or dismantle the racist economic framework that supports white supremacy and prevents non-White people of color from advancing. This is a war to either end or institutionalize segregation. This is a war that is currently being waged mostly by White people.  People of color, especially low income people of color, have the most at stake no matter what economic faction wins.  We need to be active in the battles to reinvent the credit system. That doesn’t mean reenacting that iconic scene in the cult film classic Fight Club. It just means that if we aren’t doing the work to completely upend and eliminate this system, then Whiteness will have free reign to relegate us to a number and segregate us accordingly.