Another barrier for immigrants: Their credit history
A new U.S. Citizenship and Immigrations Services’ rule linking immigrants’ credit history with their legal status is set to take effect on Oct. 15. This rule grossly distorts the use of credit reports and scores—whose main purposes are to determine how likely someone is to become 90 days delinquent on a debt. This rule should be rejected for a host of reasons. Let me just concentrate on the most egregious.
First, immigrants who have newly arrived in the United States do not have a credit history to share. They are what the industry calls “credit invisible.” Even if their country of origin has a credit reporting system, these reports do not easily transcend borders. In trying to screen out “public charges” (those who will be dependent on the government for assistance), this rule may ironically screen out the well-to-do, since credit invisibility does not discriminate. Rich bankers from Singapore are as invisible in the credit system as are poor Rohingya refugees.
Second, the official process for requesting your credit report is through the website AnnualCreditReport.com, authorized by Federal law. It is necessary to pass an identification barrier in order to access your report. Those who do not have a Social Security number or cannot answer the screening questions correctly will fail. I almost failed recently when I could not remember if my auto loan payment in 2009 was $240 or $320 a month.
Third, people who work in the financial and credit counseling industry are trained in interpreting credit reports for underwriting and counseling purposes. Department of Homeland Security (DHS) employees, I am assuming, have not received any such training. Without adequate training, stories abound of human resource professionals who disqualify a job applicant because their student loan is in forebearance. Maybe they think that forebearance is the same as a foreclosure.
Last but not least, there are as many versions of credit reports as there are credit scores. Which companies’ reports will be used? Will it be Experian, LexisNexis, FIS, TransUnion, Equifax, or one of the many other specialty credit reporting companies that exist. The same question applies to the credit score. Will it be FICO, VantageScore or one of the major credit bureaus’ own proprietary credit scores? There are hundreds of models. Once those companies are selected, who will decide what is considered a “good” credit score or a “bad” one?
Credit Builders Alliance (CBA) is a network of non-profits, many of whom serve immigrants. Our non-profit lender members (many with a CDFI certification from the Treasury Department) have experience in lending money to those who are credit invisible. In fact, it is the mission of CDFIs and other non-profit lenders to serve those in distressed communities. The norm is a borrower who does not have a strong credit history. Nevertheless, the extremely low default rates of the majority of our members’ borrowers is testament to the fact that just because you are credit invisible does not mean you are high risk.
Therefore, making a connection between being credit invisible or thin file (with only a few tradelines) and being a “public charge” is specious. This unfounded linkage between credit history and legal status needs to be broken, since it will have no predictive value whatsoever.
Dara Duguay is CEO of Credit Builders Alliance. Prior to joining CBA, she was the director of Citigroup’s Office of Financial Education and founding executive director of the Jump$tart Coalition for Personal Financial Literacy.
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