When it comes to consumer finance, traditional lenders usually review credit scores before reaching a decision. In general, the higher a consumer’s credit score is, the lower the cost of credit they will pay.
Conversely, the lower one’s credit score, the higher the cost of credit and interest will likely be. Whether applying for a credit card, auto loan or a mortgage, bad credit histories make future credit and borrowing more expensive.
But according to a new report by the Consumer Financial Protection Bureau, there are literally 45 million consumers—most of whom are either Black or Latino—who do not fall into traditional credit profiles. Beyond race and ethnicity, the affected consumers often live in low-income neighborhoods.
“When consumers do not have a credit report,” said CFPB Director Richard Cordray, “or have too little information to have a credit score, the impact on their lives can be profound. It can preclude them from accessing credit and taking advantage of certain opportunities.”
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