Bias Isn't the Only Problem with Credit Scores—and No, AI Can't Help *

Abstract

Credit scores squeeze a range of socio-economic data, such as employment history, financial records, and purchasing habits, into a single number. As well as deciding loan applications, credit scores are now used to make many life-changing decisions, including decisions about insurance, hiring, and housing. One option in the short term may be for the government simply to push lenders to accept the risk of issuing loans to minority applicants who are rejected by their algorithms. This would allow lenders to start collecting accurate data about these groups for the first time, which would benefit both applicants and lenders in the long run. Blattner also thinks that credit scores should be supplemented with other data about applicants, such as bank transactions. She welcomes the recent announcement from a handful of banks, including JPMorgan Chase, that they will start sharing data about their customers' bank accounts as an additional source of information for individuals with poor credit histories.