• Good consumer credit scores are essential in everyday financial life and were designed in ways to help prevent lending discrimination.
• But despite the good intentions of credit report companies, many experts argue that the current system is still flawed.
• A survey of 5,000 U.S. adults found that more than half of Black Americans reported having a low or no credit score, compared to 41% for Hispanics, 37% for whites and 18% for Asian Americans.

Credit scores, which represent how likely a person is to pay his or her bills, affects almost every aspect of an American's financial life.

"It's like your passport to everything that you need to do as an adult," said Frederick Wherry, director of the Dignity and Debt Network.

One key benefit built into the credit scoring system is its nondiscriminatory practice of using just numbers to determine a person's creditworthiness.

"Credit scoring when it was first developed was an advancement," said Chi Chi Wu, staff attorney at the National Consumer Law Center. "It is better than having some banker sit across from you and judge you and read the information in your credit report, because they bring a lot of their subjective analysis and their own life experience into the analysis. And if their life is different than your life, that analysis can be flawed."

But despite the good intentions of credit report companies, many experts argue that the current system is still discriminatory.

"Credit scores are based on past performance," said Aaron Klein, senior fellow in economic studies at The Brookings Institute. "The further we go back in history, the deeper the structural racism in the United States was."

A survey of 5,000 U.S. adults found that more than half of Black Americans reported having a low or no credit score, compared to 41% for Hispanics, 37% for whites and 18% for Asian Americans.

Having a low or no credit score can often bring severe financial consequences. Forty-two percent of Americans said their credit scores prevented them from accessing financial products like credit cards or loans.

"Intentional racism that happened decades ago gets baked into the system and that kind of structural racism requires no animus, no intent, but it still hurts Black and brown consumers," according to Wu.

But those within the industry argue that such criticisms are misguided.

"If the information is not on a credit report, it is systematically impossible for your credit score to be influenced by it," said John Ulzheimer, a longtime expert in the credit industry.

Sally Taylor, vice president and general manager at FICO, added, "It's important to note that credit scores didn't create some of the social economic disparities. They simply reflect the social economic disparities that are out there. The conversation should focus on addressing the root cause of these differences."

Watch the video to find out more about how credit scores can help — and hurt — consumers.

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