Following the 2020 racial justice protests, Equifax signed on to the CEO Action for Diversity & Inclusion Pledge.1 The company states that “at the core of the Equifax purpose is helping people to live their financial best.”2 As a major credit rating agency, Equifax plays a significant role in the development of wealth creation among communities of color beyond just its pledges. Approximately 54% of Black and 41% of Hispanic individuals have “no credit or a poor to fair credit score,” according to a 2021 survey.3 Lack of credit history or a poor credit score directly impacts housing, qualifying for a car loan, and in some cases even securing a new job.



The ability to build credit depends on both credit scores and credit reports, which are furnished by credit ratings agencies like Equifax. The FICO score, the most common credit score, effectively incorporates centuries of racism and bias through its modeling. For example, 35%4 of a FICO score is based on payment history, a large component of which is on-time mortgage payments, but not rental payments.5 As of 2020, only 43.4% of Black Americans owned a home, suggesting the majority of Black Americans rent and would not see an improvement in their credit score despite paying rent on time.6 Further, although 41% of Vantage Score, a credit model developed by Equifax and other credit agencies, is based on timely rental payments,7 the score will only include such information if it is furnished to the credit agency.8



Black consumers may also be disproportionately impacted by credit report errors. In 2021, the Consumer Financial Protection Bureau (“CFPB”) found consumers living in majority Black neighborhoods were twice as likely to have a dispute appear on their report compared to consumers living in white neighborhoods.9 Further, in October 2022, a House Subcommittee requested the CFPB investigate Equifax and its fellow credit agencies for possible violations of the Fair Credit Reporting Act and failing to follow up on consumer disputes.10 A third-party racial equity audit would assist in remedying the disparate impact of Equifax’s policies on communities of color and minimizing legal, regulatory, reputational and other material financial risks to shareholders.



1 https://www.ceoaction.com/ceos/?Sort=Alphabet&page=13
2 https://www.equifax.com/newsroom/all-news/-/story/head-of-equifax-foundation-talks-financial-inclusion-with-authority-magazine/
3 https://www.cnbc.com/2021/01/28/black-and-hispanic-americans-often-have-lower-credit-scores.html
4 https://www.myfico.com/credit-education/whats-in-your-credit-score
5 https://www.myfico.com/credit-education/credit-scores/payment-history
6 https://www.nar.realtor/newsroom/u-s-homeownership-rate-experiences-largest-annual-increase-on-record-though-black-homeownership-remains-lower-than-decade-ago
7 https://www.nerdwallet.com/article/finance/vantagescore-4-0
8 https://vantagescore.com/can-rent-and-utilities-improve-your-credit-scores/
9 https://www.consumerfinance.gov/about-us/newsroom/cfpb-finds-credit-report-disputes-far-more-common-in-majority-black-and-hispanic-neighborhoods/
10 https://coronavirus.house.gov/news/press-releases/clyburn-cfpb-chopra-equifax-experian-Equifax