Credit scores are not fair, and excessively lower scores among Black people reflect a discriminatory two-tier banking system.
For years, mainstream banks went out of their way to make sure Black folks couldn’t get loans and checking accounts. This created a market for “fringe” banking systems.
Think payday loans and check cashing spots. This fringe system is a multi-BILLION dollar industry that specifically targets Black communities.
Basically, they offer predatory loans with extremely high interest rates that are difficult to pay back. This results in higher delinquency and default rates - making Black folks more likely to have bad credit.
Fringe financial institutions swept through communities as early as the 1990s, which led to an influx of predatory home loans in Black neighborhoods.
Predatory home loans are risky and near impossible to pay back on time. This practice caused Black communities to suffer from sky-rocketing high unemployment and foreclosure rates well before the 2009 Recession.
The recession is over, but subprime loans are on the rise, while payday lenders continue to exploit low-income people.
In the United States, one out of five people has unpaid medical debt, and more than half of Black people have medical debt on their credit cards.
Credit scores don’t indicate a person’s trustworthiness. We must acknowledge that an incredibly unfair “two-tier” banking system exists that exploits our people.