Computers, Credit, and Human Dignity

Authors

Jonathan Weinberg, Wayne State University Law SchoolFollow

Abstract

Credit scores determine a person’s life chances. The credit scores we’re all used to, calculated by Equifax, Experian, or TransUnion, take as inputs a person’s payment history, loans, current debt, and similar financial information. But that world is changing. Modern alternative data models for credit scoring can go so far as to include an individual’s educational record, criminal history, shopping behavior, or telephone patterns. Activists, regulators, and scholars have expressed serious concerns about these new credit systems. Do they classify applicants on unfair or arbitrary grounds? Do they perpetuate, or even amplify, bias and pre-existing inequality?

Participants in this conversation tend to assume that the new credit scoring models are a departure from a stable historical norm in which lenders made credit decisions solely based on individuals’ loan repayment history and similar financial inputs. But that’s not right. The new models recapitulate a story from the mid-twentieth century, when a new credit scoring industry, relying on newly developed statistical modeling techniques, looked to a broad range of information: How many years had the person been at the same address? Did he have a telephone? What zip code did he live in? For the new method’s proponents, all data – including the applicant’s race and religion -- was fair game.

The new credit scoring crystallized a growing sense that computers, and the new computer age, had no room for fully fleshed human beings. Opponents charged that the new technology enabled and replicated bias, seized on spurious correlations, and generated arbitrary results. They saw it as stripping away agency from credit applicants, based on apparently arbitrary criteria, and as reinforcing social and economic hierarchy. More fundamentally, they argued that it was inconsistent with basic human dignity.

The technology was short-lived and has largely been forgotten. By the early 1990s, lenders––for economic rather than public-policy reasons––had moved to the model we’re familiar with today, in which credit scores are based solely on applicants’ credit history and related financial information. However, the story of 1970s-era credit scoring is still relevant today, and it provides lessons as we confront today’s use of machine-learning algorithms to categorize people and predict their future behavior.

Recommended Citation

Jonathan Weinberg, Computers, Credit, and Human Dignity, 27 SMU Sci. & Tech. L. Rev. 227 (2024)