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Lots of questions plus some answers about nature of credit scores, financial literacy, disparities

Jared Boyd is chief of staff and counsel for the City of St. Louis Treasurer's Office, which opened its Office of Financial Empowerment in 2014.
Evie Hemphill | St. Louis Public Radio

The median credit score in St. Louis is 665, a few points beneath the national median. But a closer look at ZIP-code-level data shows a median score of just 532 in areas of the city that are predominantly non-white, whereas the median credit score for predominantly white areas is 732.

“That’s a very large gap, and we are here to do something about that,” Jared Boyd, chief of staff and counsel for the City of St. Louis Treasurer's Office, said Tuesday on St. Louis on the Air.

Boyd was specifically referring to how the office is partnering this week with consumer advocates, financial educators and the FICO company to help community members "Score a Better Future” through a credit-focused event at Harris-Stowe State University.

Joining the on-air discussion alongside Boyd and host Don Marsh was Joanne Gaskin, FICO's senior director for scores and analytics.

“In today’s economy, one needs to be able to access credit on fair, affordable terms in order to purchase an auto, a mortgage,” she said, “and so this is an opportunity [to] help people meet their financial goals [and] financial dreams in life.”

Boyd, who noted that his office opened its Office of Financial Empowerment in 2014 to “help people make better decisions with their money,” said that meeting community needs when it comes to money matters starts with financial literacy. But it also can’t stop there, he added.

“When we talk about helping people avoid payday loans,” he said, “we also have to talk about making sure they live close to a bank or making sure a credit union is available for them if they’ve had difficulty maintaining accounts.

“I think it starts with education, financial education, which we do – we have classes all over the community both on credit, budgeting … we also have classes on student loans, taxes. We have classes on about 30 different topics. But we also have to be mindful of policy and programs that help people make better decisions as well.”

Joanne Gaskin, FICO's senior director for scores and analytics, participated in Tuesday's on-air discussion via phone.
Credit FICO
Joanne Gaskin, FICO's senior director for scores and analytics, participated in Tuesday's on-air discussion via phone.

Gaskin emphasized that FICO was instrumental in “democratizing” access to credit about three decades ago and said that FICO scores – which use algorithms based on credit-bureau data – are used to inform more than 90 percent of lending decisions today.

Both Marsh and listeners voiced plenty of questions about the nature of credit scores and related financial topics over the conversation. At one point Marsh referenced NPR’s story published Saturday on “How Some Algorithm Lending Programs Discriminate Against Minorities.”

“From a FICO perspective … when we look at the key ingredients for the credit score, we make certain to [avoid factoring in] race, income, wealth, geography – these are all very important from a fair lending perspective as well as equal opportunity,” Gaskin said in response. “We certainly would suggest that if there was bias in the lending decision, that that should be addressed by the regulators.”

When asked about ways people can improve their scores, she gave two suggestions – the first being to always make payments on time.

“Payment history is 35 percent of what drives a consumer’s FICO score,” Gaskin said, adding that another 30 percent of the score has to do with the total amount owed, so paying down the full amount owed on revolving debt such as credit cards can also be key.

One listener who wrote into the show via the St. Louis on the Air Facebook group asked, “What's the deal with the new FICO score model - FICO Score 9? How many lenders are using this new model, and how does it treat medical bills?”

Gaskin answered that FICO Score 9 is what the company considers its “most predictive score.”

“We always say the most predictive score is the score that is going to allow more consumers to gain access to credit,” she explained, “and this FICO Score 9 has a couple different treatments that are important to consumers. Noting the medical is important … medical collections within FICO Score 9 are treated differently than other collections.

“They carry less weight, which is important for our consumer. Also, FICO Score 9 ignores any paid collections on file and, importantly, includes rent to the degree that it’s available within the credit-bureau file.”

Boyd called the inclusion of rent-payment history a “promising” sign.

“For a lot of Americans who have been locked out of home ownership, it’s also the fact that you’re locked out of the ability to build your credit score,” he said. “So we have people in St. Louis and people in other places that have paid their utility bills, have paid their rent on time, and figuring [out] a way for FICO and other places to factor that in for benefit could help those people lower their bills.”

He noted that it could affect “how much money you pay for things.”

“If you have a car that you’re trying to get, if you’ve paid your rent in a timely fashion, that should go into factoring what you pay for that car if you’re financing it,” Boyd said.

Related Event
What: Score a Better Future St. Louis
When: 6 p.m. Thursday, November 29, 2018
Where: William L. Clay Sr. Early Childhood Education Center at Harris-Stowe State University (3026 Laclede Ave., St. Louis, MO 63103)
Space is limited; registration is required.

St. Louis on the Air brings you the stories of St. Louis and the people who live, work and create in our region. St. Louis on the Air host Don Marsh and producers Alex HeuerEvie HemphillLara Hamdan and Xandra Ellin give you the information you need to make informed decisions and stay in touch with our diverse and vibrant St. Louis region.

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Evie is a producer for "St. Louis on the Air" at St. Louis Public Radio.

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