How do we fix our credit scoring system?
Make Me Smart
Marketplace
4.6 • 5.4K Ratings
🗓️ 23 February 2022
⏱️ 27 minutes
🧾️ Download transcript
Summary
Credit scores are supposed to indicate how likely it is that someone will pay back money they borrowed. And credit scores matter — a lot. If you want to participate fully in this economy, you’ll probably need credit to buy a car or get housing and, in some cases, even to get a job. And yet, the current credit scoring system leaves lots of people out in the cold. About 26 million Americans are considered “credit invisible,” meaning they have no credit history.
“Anything that starts with good intentions, but that doesn’t have a whole lot of public accountability around it, will go off the rails,” said Frederick Wherry, professor of sociology at Princeton and director of the Dignity and Debt Network. Today’s credit scores were designed to make lending more fair by using data to determine who should have access to credit. But there’s still lots of inequity baked into the system.
On the show today, we delve into the mystery behind credit scoring and why some people think it’s time to rethink how we measure creditworthiness.
Share how your credit score has affected you with our sister show, “Marketplace Tech.”
And, there’s still time: Sign up for the “Make Me Smart” newsletter (or any other Marketplace newsletter) by Feb. 28 and be entered to win a signed “Vintage Kai” T-shirt.
Here’s everything we talked about today:
- “Are credit scores a necessary evil?” from VOX
- “No Credit Score? No Problem! Just Hand Over More Data.” from The New York Times
- “US and UK warn of beginning of Ukraine invasion” from BBC News
- “Trucker convoy plans protest in Washington D.C. ” from WNEP
- Check out the colorful container ship graph Kai referenced
Transcript
Click on a timestamp to play from that location
| 0:00.0 | So what you call it the go button? |
| 0:03.0 | Is that like the technical audio engineer term trough or hey everybody? |
| 0:06.3 | I'm car Rizdo welcome to make me smart none of us is as smart as all of us is what we're saying on this podcast |
| 0:10.8 | And I'm Kimberly Adams. It's Tuesday, which means it's time to dive deep into a single topic and today we are going to talk about |
| 0:19.6 | You can love them or hate them, but we need them I guess maybe credit scores credit scores matter so much to participate in this economy |
| 0:27.8 | If you need a loan for a car or a house you need credit if you want to build your wealth over time |
| 0:34.0 | You need credit and apparently nowadays if you want to apply for a job in some instances employers check your credit report |
| 0:42.9 | Yeah, and we're gonna get to that part of it |
| 0:44.6 | But the basic the basic thing is that credit scores are supposed to assess whether you can repay a loan you have taken out on time |
| 0:51.9 | Challenge of course is that that's not how they're used today is Kimberly alluded to they're used for a bunch of other things |
| 0:56.4 | They're a little bit |
| 0:59.0 | Opec shall we say and there are a bunch of people in this economy who need credit scores who can't get them who the credit score |
| 1:04.4 | Enterprise and industry just does not see so we're gonna talk about how they work how they're supposed to work |
| 1:10.6 | And where we might go from here Frederick where he is a professor of sociology at Princeton University also the director of the |
| 1:16.6 | Dignity and debt network |
| 1:18.6 | Professor Walker with the podcast |
| 1:21.0 | Happy to be here. So in an ideal world |
| 1:23.9 | How should the credits going apparatus work? |
| 1:28.8 | Well, and an ideal world we would expect people who are |
| 1:33.4 | Deserving of credit to be able to access it |
| 1:35.8 | But we would also expect that |
| 1:38.3 | Areas in their life that credit has really nothing to do with that they would be free from its its controls |
... |
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