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46 Suffolk U. L. Rev. 935 (2013)
Discriminatory Effects of Credit Scoring on Communities of Color

handle is hein.journals/sufflr46 and id is 977 raw text is: Discriminatory Effects of Credit Scoring on Communities of Color Lisa Rice* & Deidre Swesnik** TABLE OF CONTENTS I. INTRODUCTION............................... .............. 936 II. THE NATION'S DUAL CREDIT MARKET ROOTED IN DISCRIMINATION.......940 A. Overt Historical Discrimination .....................940 B. Subprime Lending and Its Long-Term Discriminatory Effects.....943 C. The Proliferation of Fringe Lenders in Communities of Color......947 III. CREDIT SCORING HAS A DISCRIMINATORY IMPACT AND IS NOT THE BEST MEASURE OF RISK ..................... ........949 A. Limited Scope, Quality, and Transparency of Credit Information ............................. ......950 B. Disparate Impact of Credit-Scoring Factors ........................952 1. Payment History: 35% of FICO Score......................953 2. Amounts Owed: 30% of FICO Score ....... ................954 3. Length of Credit History: 15% of FICO Score......................955 4. New Credit: 10% of FICO Score............ ......956 5. Types of Credit Used: 10% of FICO Score ...... ......957 C. Existing Credit-Scoring Systems Do Not Adequately Predict Risk.......................................957 D. Risky Loan Products and Unsafe Lending Environments-Not Borrowers-Were Clearly the Culprit.......................960 IV. WHY THE FEDERAL GOVERNMENT AND LENDERS HAVE AN OBLIGATION TO CHANGE THE SYSTEM....................961 V. POLICY AND ENFORCEMENT SOLUTIONS TO IMPROVE CREDIT-SCORING SYSTEMS........................................962 A. Broaden the Scope of Financial Data Utilized by Underwriting and Credit Scoring Models . .........................963 * Vice President, National Fair Housing Alliance. ** Director of Public Policy and Communications, National Fair Housing Alliance. About the National Fair Housing Alliance (NFHA): Founded in 1988 and headquartered in Washington, DC, NFHA is a consortium of more than 220 private, nonprofit fair housing organizations, state and local civil rights agencies, and individuals from throughout the United States. Through comprehensive education, advocacy, and enforcement programs, NFHA protects and promotes equal access to apartments, houses, mortgage loans, and insurance policies for all residents of the nation.

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