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Monday, October 1, 2007

Fed Report Studies Effects of Credit Scoring

Since the mid 1980s, when credit scores based solely on the credit records of individual consumers were introduced, credit scoring has become an integral part of consumer lending markets. However, the practice has raised concerns about whether it adversely affects minorities or those who rely largely on nontraditional sources of credit.

Under directions from Congress, the Federal Reserve Board studied the effects of credit scoring on credit markets and recently presented the Report to the Congress on Credit Scoring and Its Effects on the Availability and Affordability of Credit.

The report concludes, among other findings, that “there is no compelling evidence that any particular demographic group has experienced greater changes in credit availability or affordability than other groups due to scoring.”

Credit scores are only one factor considered in lending decisions. The study does not address how credit scores are weighed relative to other factors considered in lending decisions and whether this weighting differs across demographic groups.

To read the report, visit: