The Value of a Credit Score

Amidst the current financial crisis, many U.S. households — particularly those found in low‐income and immigrant communities — face an intensifying struggle to build and protect financial assets. In this struggle, individual credit histories play a far more significant role than many consumers realize. Though often thought of merely as a tool for acquiring loans and credit, everything from insurance rates to utility deposits, wireless service to housing approval — even employment — may be affected by a person’s credit score. That bad credit disqualifies consumers from acquiring certain products and services is well understood, even within communities lacking access to critical financial information.

What many people do not realize, however, is that having thin or no credit is often equally, and unfairly, prohibitive. As it turns out, building a credit file is a somewhat opaque and arbitrary process, involving proprietary formulae that typically do not take into account significant aspects of an individual’s payment history (e.g. rent, utilities, insurance, etc.).

How Washington Appleseed is Helping

As part of its commitment to ensure equal financial opportunity to underserved communities across the country, and to assist such communities in building assets, Appleseed researched the importance of resolving the disproportionate impact that credit scores have on thin credit communities and wrote the white paper The Value of a Credit Score in order to generate discussion and proposals for innovative solutions. As a starting point for such a discussion, Appleseed proposes a multi‐tiered approach that focuses on consumer education, market policy and regulatory oversight.

In addition to this national collaborative report, Washington Appleseed researched additional topics to help chart a course for how alternative factors could be used to help individuals with thin credit build their credit history.

Publications

Download a free copy of The Value of a Credit Score: Developing an Equitable Model for the Use of Credit Histories in Financially Underserved Communities.

Pro Bono and Community Partners

The Appleseed Network