Released: September 01, 2007

Fed finds no bias in credit scores

Source: Kenneth R. Harney, Washington Post (Free Registration)

In a report to Congress that is certain to generate controversy, the Federal Reserve Board says that credit scores vary “substantially” among racial and ethnic groups but that their use has made credit more available for major purchases such as buying homes.

The Fed’s study, encompassing credit bureau records and demographic data from a national statistical sample of 301,536 people, was mandated by Congress in 2003. Credit scores are heavily used not only in home mortgage underwriting and pricing, but also for credit card, auto loan, employment, insurance and rental application screening.

Critics have questioned the accuracy and fairness of credit-score models, charging that in some cases they are inherently biased against minority groups such as blacks and Hispanics.

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