The median credit score in St. Louis is 665, just a few points above the national median. But a closer look at the zipcode-level data shows a median score of just 532 in predominantly non-white areas of the city, while the median credit score for predominantly white areas is 732.
“It’s a very big gap, and we’re here to do something about it,” said Jared Boyd, chief of staff and counsel for the treasurer’s office for the city of St. Louis.
Boyd was specifically referring to how the office partnered with consumer advocates, financial educators and the company FICO to help community members “Mark a Better Future” at Harris-Stowe State University. November 29.
“In today’s economy, you need to be able to access credit on fair and affordable terms to buy a car, a mortgage,” said Joanne Gaskin, Senior Director of Scores and Analysis at FICO, “and so it is an opportunity [to] help people reach their financial goals [and] financial dreams in life.
Boyd, who noted that his office opened its Financial Empowerment Office in 2014 to “help people make better decisions with their money,” said meeting the community’s money needs begins with financial literacy. But it can’t end there either, he added.
“When we talk about helping people avoid payday loans,” he said, “we also have to talk about making sure they live near a bank or making sure that a credit union is available to them if they have difficulty maintaining accounts. “
Gaskin pointed out that FICO was instrumental in the “democratization” of access to credit about three decades ago and said that FICO scores – which use algorithms based on data from credit bureaus – are used to inform over 90% of loan decisions today.
“From a FICO perspective… when we look at the key ingredients of credit score, we make sure to [avoid factoring in] race, income, wealth, geography – these are all very important from a fair lending perspective as well as equal opportunity, ”said Gaskin. “We would certainly suggest that if there was any bias in the loan decision, it should be addressed by regulators.”
She said people can improve their credit scores by making payments on time and paying off the full amount owed on revolving debt such as credit cards. “Payment history is 35% of what determines a consumer’s FICO score,” Gaskin said, and an additional 30% has to do with the total amount owed.
Gaskin said the FICO Score 9 is the company’s “most predictive score”, which is “the score that will allow more consumers to access credit.” She said it weighs less on medical collections, ignores all paid collections on file – “and, most importantly, includes rent as long as it is available on credit bureau file.”
Boyd called the inclusion of rental payment history a “promising” sign.
“For a lot of Americans who no longer have access to home ownership, it’s also the fact that you don’t have the ability to build your credit score,” he said. “So we have people in St. Louis and people in other places who have paid their utility bills, paid their rent on time and are thinking [out] a way for FICO and other places to take that into account could help these people lower their bills.
Reprinted with permission from news.stlpublicradio.org.