FormFree – Changing the Way We Think About Credit Scores


Credit scores have long stood as the gatekeepers of the financial world, and companies like FormFree are altering that norm. For decades, a 3-digit figure has had all the power to determine who gains access to loans and who faces rejection. And while there’s no denying that these numbers can certainly prove one’s credibility, the history of credit scores is a tale of numerical judgment where discrimination and biases have run rampant.

To truly grasp these biases and their firm hold on millions of Americans, it’s vital to understand why the credit score model exists and its dominant role in most large-scale financial decisions. However, in doing so, it becomes apparent that the traditional credit score, while considered a necessary benchmark, has created an uneven playing field for diverse borrowers.

FormFree believes everyone should have access to loans if repayment is possible. Those with poor or no credit scores should still be able to prove their credibility without their ethnicity, gender, or social background having a say. It’s time to even the playing field by creating a fair system for borrowers of all kinds.

Why Do Credit Scores Have Such a Large Say for Loans?

The inception of the credit score can be traced back to the mid-20th century when lenders sought a standardized method to evaluate the creditworthiness of potential borrowers. Before introducing credit scores, lenders relied heavily on subjective assessments, personal relationships, and localized data to make lending decisions. This decentralized approach lacked consistency and often led to inefficiencies and biases in the lending process.

Credit scores aimed to provide a more objective and uniform metric, streamlining the evaluation of an individual’s financial history and behavior. Their fundamental purpose was to mitigate risk for lenders by predicting the likelihood of borrowers repaying their debts. This simplification allowed for faster and more standardized lending decisions, promoting efficiency in the financial industry.

However, as credit scores became ubiquitous among the mass public, their influence expanded beyond their intended purpose, shaping lending decisions and influencing employment opportunities, housing eligibility, and insurance rates. And not long after, various biases the system aimed to eradicate trickled back into the masses.

Exploring the Biases Within the Credit Score System

Despite their practical utility, credit scores are not without controversy. Critics argue that the singular focus on a numerical rating oversimplifies the multifaceted nature of financial responsibility. Additionally, the scoring models themselves have faced scrutiny for perpetuating systemic biases, disproportionately impacting marginalized communities.

The evolution of credit scoring reflects an ongoing tension between the need for efficient risk assessment and the imperative to create a fair and inclusive financial system. In the landscape of loans, the pervasive reliance on credit scores has painted an incomplete picture of an individual’s financial capability. This reliance fails to capture the nuances of income, spending habits, and overall financial health.

Minority communities, in particular, have faced the brunt of these disparities, experiencing higher denial rates and elevated interest rates. Geographical location, flawed data, outdated scoring models, and limited access to traditional credit have perpetuated such biases, creating barriers for many deserving individuals seeking financial opportunities.

Multiple studies highlight these statistical disparities. According to Shift Processing, White Americans have an average credit score of 734, while Black Americans carry the lowest average score at 677. Additionally, states with the highest percentage of Black Americans, such as Alabama, Georgia, and Mississippi, feature among the lowest average credit scores in the country.

Other research indicates that payday lenders often concentrate on African American and Latino neighborhoods and offer loans with less favorable terms, so borrowers are more likely to default. Much of this comes from the credit scoring algorithms, which feature historically inaccurate data and highlight privilege or lack thereof.

Minority business owners of color also face lower approval rates, and black mortgage borrowers face higher interest rates. Hispanic Americans deal with a 12% denial rate for home loans, and women struggle with lower approval rates than men. When they receive loans, they face higher interest rates and lower loan amounts than their gender counterparts.

FormFree is on a Mission for Borrower Equality

FormFree is aware that something must be done to democratize lending without bias. Understanding that credit needs a complete overhaul, the team at FormFree recently introduced their new Passport Wallet app.

Passport Wallet® operates by utilizing financial data, such as bank history and recurring payments, while ensuring data anonymization before transmitting it to a lender. This approach addresses racial bias and limited credit history issues, ensuring that individuals facing such challenges have equal access to loans.

Through their new RIKI® system, FormFree can measure an individual’s Ability-to-Pay (ATP) without relying on a credit score. FormFree instead employs alternative credit criteria, such as rental payment history or residual income assessments, to assess loan eligibility. Prospective borrowers share data directly from their financial institutions, providing equal opportunities to individuals who might otherwise be overlooked.

So what’s the catch? Well, there is none. Using FormFree’s Passport Wallet takes just minutes, and borrowers can quickly generate what is known as a Medallion that reflects their true ability to pay and borrowing power. That Medallion is then stripped of any identifying information so lenders can evaluate potential borrowers based solely on their financial data. Since anonymized data prevents discrimination and prevents lenders from selling data, FormFree is placing the power back in the hands of consumers by granting them complete control of their financial DNA.

How Do I Get Started With FormFree?

Signing up with FormFree is as simple as downloading the app and creating an account. Simply connect your bank accounts and financial records, and FormFree will generate your Medallion for lenders to see.

Among the most promising aspects of Passport by FormFree is that the company never gives anyone your info until you’ve chosen a prospective lender. From there, you can navigate your loan specifications and receive the money you deserve without a 3-digit number playing a role.

Visit FormFree’s website to stay up-to-date with news, breaking info, and the release of Passport in the very near future

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