How does credit scoring impact fair lending and minority home ownership?

by Stacy Carchman

A recent study by the National Association of Realtors highlights how credit scoring impacts fair lending and minority homeownership rates, according to a press release.

NAR will use the research to shape policy aimed at boosting minority home ownership. At a recent virtual event held by NAR, in recognition of Fair Housing Month, they discussed how to increase opportunities for Black and Latino Americans.

“Minorities are far more likely to be ‘unscoreable’ or have relatively weak credit scores using traditional credit bureau data,” Dr. Ann B. Schnare said at the NAR event. “Incorporating additional data into the credit evaluation process can open doors for many deserving borrowers and boost minority homeownership rates.”

Under a new proposal, a five-factor “SCALE” may be used to incorporate important considerations when financing a mortgage.

  • These will include such factors as:
  • Societal Values
  • Contextual Integrity
  • Accuracy
  • Legality
  • Expanded Opportunity

The NAR press release noted that the Black homeownership rate (46.6%) lags more than 30 percentage points behind the white homeownership rate of 75.8%.

“A credit report and credit score are the gateway to a mortgage,” said NAR President Charlie Oppler, in the release. “But for too long, inaccurate credit reporting methods have raised the cost to borrow while limiting access to mortgage credit for prospective borrowers, particularly those from minority populations and rural communities.”

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