cancel
Showing results for 
Search instead for 
Did you mean: 

Credit Reporting Industry: A Fair System or Modern-Day Redlining?

tag
Bilbo_T_Baggins
New Member

Credit Reporting Industry: A Fair System or Modern-Day Redlining?

Hello MyFico community!

 

 

I hope this post sparks a thoughtful discussion on an issue I've been pondering lately: the role of credit scores in housing decisions and whether it has become a contemporary form of redlining, particularly affecting minority communities.

 

 

Background: With the increasing reliance on credit scores in various financial decisions, including housing, it's crucial to assess whether this system is truly fair and equitable. The question that has been on my mind is: "Has credit scoring replaced redlining as the favored tool used to discriminate against minorities in housing decisions?"

 

 

Discussion Points:

  1. Historical Context: How does the history of redlining compare to the current impact of credit scoring on minority communities?
  2. Systemic Bias: Are there inherent biases in the credit reporting industry that disproportionately affect minorities?
  3. Access to Credit: Do credit scores contribute to disparities in access to housing and mortgage opportunities?
  4. Legal and Ethical Considerations: Are there existing laws and regulations addressing potential discrimination in housing decisions based on credit scores?
  5. Alternative Assessments: Should there be alternative methods for evaluating creditworthiness that are less prone to discriminatory effects?

 

Questions for the Community:

  • Have you observed or experienced disparities in housing decisions based on credit scores, particularly in minority communities?
  • Are there specific practices within the credit reporting industry that you believe contribute to or mitigate discrimination?

 

Conclusion: I'm eager to hear your thoughts and experiences on this matter. Let's engage in a constructive conversation about the role of credit scores in housing decisions and whether it perpetuates or combats discrimination.

Thank you for contributing to this important dialogue!

Message 1 of 16
15 REPLIES 15
Cowboys4Life
Frequent Contributor

Re: Credit Reporting Industry: A Fair System or Modern-Day Redlining?

Your hypothesis is flawed from the start because it assumes that the credit score is the ONLY criteria that lenders use in approving a mortgage.

 

I recently purchased my first home and my credit score was one of many factors the lender assessed.  The preliminary for approval was based on income, debt, debt TO income, and credit score.  I was approved for up to $400k to purchase a home.  Once I found a home the secondary part of the process looked at tax returns, bank statements, length of employment, and appraisal before final approval.  At NO point in the process was my race ever discussed and I never met with the lender face to face.  It was all by email or phone call.  The neighborhood I am in would not have even helped the lender as it is VERY mixed race/ethnicity.  I was approved for my home because of a good not great score, solid income and employment, and excellent debt to income ratio.  Race and/or redlining wasn't even a consideration.

 

The second factor that undermines your theory is the housing crisis.  Affordable housing has all but evaporated in this country.  The reasons why incite too much vitriole but the reality is sellers have no trouble finding multiple qualified buyers and those with the most money win the battle.  Lenders don't have to use race as a factor in declining a mortgage application.  Your credit score can be over 700 with minimal debt but if you want to buy a home in an area where prices average $450k or more for basic homes not even McMansions and your income is less than $100k per year the chances are slim you will be approved at today's rates even with an excellent score.  The resulting payment with PMI if required along with home owner's insurance and taxes could put the payment at more than 50% of take home which no lender is going to approve regardless of your other factors.

 

Over the past 3 years I have seen multiple posts on social media from a rainbow of people all screeching that because they pay $2000/month in rent or more they should just be approved for a mortgage.  As a current home owner they are clueless as to what is involved with owning a home.  The amount of money needed to support this NEVER ends.   The work, the upkeep, and repairs keep coming and that doesn't even scratch the aesthetic needs/wants home owners have.  I would LOVE a back yard oasis with a pool/spa.  Not going to happen any time soon. Could I go further into debt and take out more loan(s) to get a pool?  Sure.  Is it the smart thing to do?  No it isn't.  I am happy with my purchase and wouldn't change anything but my race, gender, ethnicity are non-factors in my home purchase.  There are too many other forces at work keeping lower earners down than simply minority decision making.

 

 

Message 2 of 16
Bilbo_T_Baggins
New Member

Re: Credit Reporting Industry: A Fair System or Modern-Day Redlining?

Thank you for sharing your experience and insights into the mortgage approval process. It's commendable that your home purchase was based on factors such as income, debt, and credit score, and I appreciate hearing about your positive experience.

 

I'd like to address a specific point you raised regarding the assumption that discussing race is a necessary condition for racism to affect a process. While it's true that explicit discussions about race may not occur in every transaction, systemic and structural biases can still exist without overt conversations. Racism can manifest itself through historical legacies, institutional policies, and societal norms, influencing outcomes even when not explicitly mentioned.

 

Acknowledging this nuance is essential for fostering a more inclusive and equitable system. It allows us to examine the broader context in which decisions are made and consider the potential impact of systemic biases, even when not overtly discussed.

Message 3 of 16
markbeiser
Established Contributor

Re: Credit Reporting Industry: A Fair System or Modern-Day Redlining?

Bot or not?🤔

Back to gardening until Late February 2025.
Current FICO8:
Message 4 of 16
NoMoreE46
Community Leader
Senior Contributor

Re: Credit Reporting Industry: A Fair System or Modern-Day Redlining?

Yep, AI-ish.

 


@markbeiser wrote:

Bot or not?🤔


 

Message 5 of 16
Bilbo_T_Baggins
New Member

Re: Credit Reporting Industry: A Fair System or Modern-Day Redlining?

LoL - Likely one of the more profound posts in this entire forum and you're only question is "bot or not"?

 

Hmmmm - there is a reciprocative reply I could deploy here.... maybe I'll share it in an update to this post if my suspicions about your "concerns" pan out!

Message 6 of 16
vntrsc
Frequent Contributor

Re: Credit Reporting Industry: A Fair System or Modern-Day Redlining?

Perhaps the moderators of this forum might want to chime in.

 

From https://ficoforums.myfico.com/t5/User-Guidelines-General/5-Things-We-Don-t-Talk-About/td-p/336929

 

5 Things We Don't Talk About
To maintain the spirit of friendliness and support that makes the FICO Forums the kind of place we've come to value, please be respectful of others by avoiding references to certain topics that might be offensive or hurtful. These topics include, but are not limited to:

* Race
* Nationality
* Sex
* Religion
* Politics
Message 7 of 16
Bilbo_T_Baggins
New Member

Re: Credit Reporting Industry: A Fair System or Modern-Day Redlining?

"avoiding references to certain topics that might be offensive or hurtful"

 

I'm pretty sure this is actaully aimed at trolls who would actually support actions like Redlining or whatever is replacing it currently. Trolls who may use common racial slurs, etc. This post is certainly not a troll and is only seeking input regarding an actual academic topic.

 

 Are you a person who is supportive of redlining?

Message 8 of 16
Brian_Earl_Spilner
Credit Mentor

Re: Credit Reporting Industry: A Fair System or Modern-Day Redlining?


@vntrsc wrote:

Perhaps the moderators of this forum might want to chime in.

 

From https://ficoforums.myfico.com/t5/User-Guidelines-General/5-Things-We-Don-t-Talk-About/td-p/336929

 

5 Things We Don't Talk About
To maintain the spirit of friendliness and support that makes the FICO Forums the kind of place we've come to value, please be respectful of others by avoiding references to certain topics that might be offensive or hurtful. These topics include, but are not limited to:

* Race
* Nationality
* Sex
* Religion
* Politics

I feel the post is borderline, but due to redlining being a valid concern, even in this day and age, it is a valid topic. I did not report it as it was a well thought out and expressed question. Should the conversation devolve into strictly racial talk, the thread can be reviewed for moderation.

 

    
Message 9 of 16
JoeRockhead
Senior Contributor

Re: Credit Reporting Industry: A Fair System or Modern-Day Redlining?


@Bilbo_T_Baggins wrote:

"avoiding references to certain topics that might be offensive or hurtful"

 

I'm pretty sure this is actaully aimed at trolls who would actually support actions like Redlining or whatever is replacing it currently. Trolls who may use common racial slurs, etc. This post is certainly not a troll and is only seeking input regarding an actual academic topic.

 

 Are you a person who is supportive of redlining?


 

The simple truth is that it's not much of a topic here. People coming here to complain, or seek advice because they feel they've been discriminated against, or wronged in some unfair way are very rare. In the majority of cases, it's ultimately found they didn't get approved because of their own actions, or lack thereof.  Trying to continue to initiate a conversation about something that isn't all that prevelant (in this forum at least) appears as more of an attempt to stir debate, nothing more. 

 

Message 10 of 16
Advertiser Disclosure: The offers that appear on this site are from third party advertisers from whom FICO receives compensation.