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Home > Journals > Michigan Law Review > MLR > Volume 124 > Issue 3 (2025)

 

Abstract

Creditworthiness, or the likelihood that one will repay one’s debts, is typically signaled through a three-digit number known as a credit score. Yet, over thirty-two million adult-aged consumers lack adequate consumer credit reports and therefore do not have a traditional credit score. As a result of being unscored, these consumers are generally presumed uncreditworthy and foreclosed from mainstream credit markets. Unscored consumers are often relegated to extractive, fringe credit markets that neither require nor build credit scores. More insidiously, however, a growing number of non-credit contexts, including rental housing, utility services, and employment markets, look to creditworthiness to determine eligibility and price. Thus, unscored consumers face barriers beyond credit markets in ways that can marginalize them socially and entrench financial hardships. Innovations in the credit markets have aimed to serve unscored consumers by expanding scoring models to include nontraditional data metrics, such as alternative underwriting, or evading credit scores altogether, such as through earned wage access (EWA) programs. Such innovations have indeed had some success reducing the number of unscored consumers or the negative impacts related thereto, but they have also imposed on unscored consumers disproportionate costs while failing to offer them a comprehensive escape from the scarlet letter awarded by being unscored.

The plight of the unscored consumer rests upon an as-yet-resolved conundrum of our credit scoring system: To build a fair credit score, a consumer first needs access to fair credit, which in turn requires a fair credit score. This classic chicken-and-egg dilemma is based on the maxim that past behavior is predictive of future conduct. Yet, for unscored consumers who lack credit history, the maxim is unduly distorted to treat those with no past behavior as those with poor past behavior. Specifically, the system creates a form of adverse selection that harms unscored consumers and market providers alike. This Article argues that eliminating the marginalized “unscored” consumer status with a presumption of creditworthiness would better achieve the efficiency and equity goals undergirding the credit scoring system. Alternative approaches abroad may prove instructive, though they reflect distinct policy and cultural priorities, since they avoid the marginalized “unscored” status. By surfacing the sociopolitical nature of credit scoring, this Article creates space to reimagine the U.S. system in light of its market failures.

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