The negative consequences of a bad credit score, or no credit history at all, are well documented. Not only are credit reports used for opening credit cards; they are also used by employers in hiring decisions and by landlords when selecting tenants. Families with low credit scores often find themselves in an impossible cycle where credit reports limit employment opportunities as usurious interest charges pile up. And just as people of color are more likely to be poor, so too poor people are more likely to have low credit scores, in effect making credit scores a proxy for race, perpetuating racial inequality.
It’s tempting to think low credit scores are the result of poor financial behaviors, but evidence suggests low-income households are active savers and the majority of those living in poverty work. The problem is not that low-income families are not creditworthy, but rather that our credit scoring system ignores indicators that demonstrate their investability.
Everyone deserves a fair and equitable opportunity to access capital, government services, and philanthropic dollars. Thus, we need a scoring system that assesses initiative and reliability by taking a look at a comprehensive profile of each individual rather than financial indicators only. People should not be viewed simply as profits to be maximized or costs to be minimized. FII’s Initiative Score not only demonstrates the investability of low-income families by considering non-financial indicators of success but can influence and inform the deployment of resources from multiple sectors. The old way of doing business hasn’t worked for the poor for decades. FII’s Initiative Score is painting an alternative picture.
To learn more about the Initiative Score, we invite you to read the following.
- Initiative Score: Access to Capital for Families
- Scoring Hustle: FII’s Announces the Initiative Score
If you want to learn how you can partner with FII and use the Initiative Score contact: Ashley Sherwin, firstname.lastname@example.org