But, what if you’re among the “credit invisible,” those with no lines of credit or a borrowing his- tory? Without that data, you can be invalidated even if you are finan - cially viable. Statistically, 1 in 10 Americans are credit invisible. This demographic can include Black Americans, Hispanics, residents of low-income neighborhoods, young consumers, immigrants, female victims of domestic abuse, and the newly divorced. This “magic number” infiltrates our lives on multiple levels and has become for many, a quali- ty-of-life issue. THE SYSTEM IS ERROR-PRONE AND BROKEN According to the most recent study in 2013 by the Federal Trade Com- mission, or FTC, one in five people have errors on their credit reports. Inaccuracies included old, irrele- vant data, false collections data, and the wrong person’s data attributed to the account of a person with the same name. In 2017, 65 percent of complaints filed against cred - it bureaus pertained to inaccurate information on credit reports across all three bureaus. The Fair Credit Reporting Act mandates that when errors are found and challenged, they must be investigated and fixed. However, many people are unaware of the errors or the process involved for correction. Democratic and Republican members of the House Financial Services Commission agree that the current system of credit scoring is broken and in need of extensive repair. Democratic Chairwoman Maxine Waters noted that part of the problem is that to credit bureaus, we aren’t customers, but goods. We are assessed by quantitative factors, not
qualities. There are ongoing legis- lative efforts to promote precision and equity. The goals are to improve reporting with strict guidelines around accuracy. FICO and Experi - an are reportedly making changes to include consumer data that can alleviate credit invisibility as well as broaden reliability factors. FOCUSINGONFICOSCORES CANLIMITYOURPOOLOF WORTHYRENTALAPPLICANTS Property managers must have access to assessment tools that minimize risk. They’ve had to place their faith in the values of an imper- fect evaluation process. It has not only been a disservice to consumers, but to those who face the ardu- ous and ongoing task of securing reliable tenants. Long before the pandemic chaos, there have been factors that handicapped both the property owner and the lessee in the rental market. By incorporating a broader data set, and through the cooperation of credit bureaus and legislative bodies to amend inac- curacies and miscalculations, both landlord and prospective tenants will achieve their goals on a more level playing field. •
THE LIMITATIONSAND BIAS INHERENT IN FICO SCORES FICO has proclaimed that before their credit scoring, there was no unbiased evaluation system for loan applicants. They called their scor- ing system the democratization of credit. Yet, the truth is that our data has become commoditized, mone- tized legal tender. Our life experi- ences and earnings are distilled to a number that is supposed to depict our trustworthiness and reliabili- ty. Credit scores are well-known to contain racial and socio-econom- ic bias, with elevated degrees of disparity among Black and Latino populations who have substantially lower scores. There are inaccuracies and omissions of information that could legitimize a broader populace, particularly Hispanics and Black Americans. Data like cell phone, util- ity, and rental payment history can provide a fuller picture of worthiness and reliability. So, what data comprises the FICO formula? Historically, they have looked at these areas to render a score:
10% Credit Utilization
10% Timely Payments
Daniel Berlind is the Founder and CEO of Snappt, a San Francisco-based software company that helps multifamily housing companies prevent tenant and financial
35% Credit History
15% New Credit
fraud. A former real estate executive, innovator and entrepreneur, Dan founded Snappt in 2017 after running his own property management company where he recognized a significant, industry-wide financial issue in the billion-dollar apartment rental industry. The company’s technology aids and streamlines the apartment rental process by reducing bad debt, increasing asset value and minimizing the application review process. Previously, Dan was a professional baseball player for the Chicago Cubs and Minnesota Twins after attending California Polytechnic State University.
30% Credit Mix
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