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Chloe b.@2x

$125 Does Not Equal $200,000

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Yes, I know the equation in the title is obvious. But, I’m concerned that we are not creating more of a stink about the Equifax settlement.

Equifax is one of three credit bureaus – the institutions that produce our credit scores. It reported that it failed to protect us after being hacked in September 2017. Researchers determined that Equifax’s ineffective IT protections affected nearly 150 million Americans and put their sensitive credit information and personal data at risk. As such, Equifax will now pay up to $700 million for it.

Given the conversations around privacy and technology with Facebook and that trendy new FaceApp, this conversation is no doubt important. But, the reporting around the settlement fails to take the ever-widening wealth gap into account. Especially as it relates to women and people of color.

In 2017, The Close the Women’s Wealth Gap Report defined the impact of having a low credit score: $200,000 in lost wealth over a lifetime. The median net worth for a woman of color is $5. The point here is a credit score is absolutely significant when we are talking about building wealth and closing the wealth gap. Apparently, it’s 40,000 times more significant than we thought.

The entire credit score system and algorithms are built to harm women and people of color.

The two most important factors that make up a credit score are credit history and capacity. Credit history answers if you have paid your bills on time. Capacity answers how much of your available credit are you using. The industry standard says that an individual should use less than or equal to 30% of her available credit because after that, your credit could be negatively impacted.

Some people might think that makes sense. They’d say, “it makes sense that we shouldn’t put too much money on our credit cards.” I say, check your privilege. Women and people of color typically go over the 30% capacity threshold. This lowers your credit score. Some credit score algorithms do not include rent and utilities in your credit history. This prevents your score from going up when you consistently pay them on time.

Suffering a double vulnerability already as a woman of color, I’m approaching the opportunity to receive $125 from the Equifax settlement with disgust. The system is already built against me. I’m more likely to have a lower credit score. The hack happens and could have made my credit score even worse without me knowing. And the best I will get is $125?

I don’t have much to say other than I’m angry and unsurprised.

If you don’t know how to or don’t pull your credit annually, the government guarantees a free annual credit report. You can do so here. When you are pulling your report, they will ask you questions that are meant to trick someone trying to steal your identity. So, if a question asks where you got your mortgage from and you don’t have one. Don’t freak out. Just simply click the answer that says, “I don’t have mortgage.”

Be careful when you receive your free credit reports, as you will be bombarded with solicitations to sign up for credit monitoring or the likely for a “small” fee. The settlement allows you to get free monitoring for a number of years without being solicited after the expiration. Or, at least that’s what is written. We will see if the credit bureaus choose to function as quasi-government agencies with greater loyalty to profits. Or, if they can be rehabilitated and begin to protect consumers.

If you have questions about or discrepancies on your credit report, feel free to follow me on Twitter @chloebmckenzie and ask away.

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My resources do more than just build wealth literacy; they aim to impart wealth-building capability. All of my resources are culturally responsive, translated in Spanish and French and accessible for individuals with learning differences or disabilities.

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