The Impact of Credit Scoring and Automated Underwriting on Credit Availability

During the 1970s and 1980s, credit scoring and automated underwriting became widely accepted for most forms of consumer lending, other than mortgages. An implicit part of that acceptance by creditors was that scoring could enable expanded lending while maintaining or even reducing loss rates. There is little evidence—or, at least, little memory—of any serious concerns on the part of regulators or consumer activists during those years that scoring might somehow restrict access to credit for any significant subset of the population. But, in the last four or five years, such concerns have been raised more and more frequently. This paper addresses both the reasons for this change in perception, and the answer to the substantive question: How do credit scoring and automated underwriting affect access to credit by the population as a whole and by traditionally underserved segments of the population?1