I Have an 808 Credit Score but It Took 3 Tries to Refinance My House

  • I bought my house in 2021 when mortgage rates were at historic lows, but I was given a 7.5% rate.
  • Despite my excellent credit score and financial profile, it was even harder to refinance. I was denied twice.
  • I finally went to a brokerage with a more diverse staff and refinanced my home, but it shouldn’t be this way.

If you’re one of those folks who thinks people of color are exaggerating when they say they can’t get a decent bank loan, I’m here to tell you: As a Black consumer with a near-perfect credit score, financial discrimination is real.

Earlier this year, I set out to refinance the mortgage on my Atlanta home. When I purchased this house in 2021, I received a really high interest rate (7.5% when market rates were 2%), apparently because I’m an entrepreneur.

My closing attorney at the time remarked that this was one of the highest interest rates he’d ever seen for a buyer with my profile. I have an 808 credit score, a low debt-to-income ratio, and healthy cash reserves. By traditional lending standards, I should have had no problem getting the best rate for a loan.

I told the closing attorney that 7.5% was predatory, but since those were the only terms I could get, I would refinance the loan later. I figured there was less discrimination in refinancing, and that I would only have to deal with this situation temporarily.

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I had a terrible time trying to refinance

Boy was I wrong. The discrimination during the refinance process was worse. It took three tries to get approved — despite my strong finances and, in less than a year, a 30% increase in home equity.

The first lender denied me when they found out that I, like thousands of businesses during the pandemic, had taken out a PPP loan for my business. Even though the loan was forgiven, the mortgage lender said the fact that I had this loan in the first place was a sign of poor business management. I immediately marveled if the Los Angeles Lakers or Harvard were denied for a loan because of the PPP money they received. We both know the answer to that.

The second lender denied me after reviewing the additional income I make for being a thought-leader, which includes speaking engagements, acting in TV commercials, and earning fellowships. The company determined that because the values ​​weren’t the same every month, I was too high risk. Mind you, my main source of income was sufficient for approval. However, the underwriter said he just didn’t feel comfortable with me having additional streams of income.

A conversation with a retired underwriter prompted me to shift course

By this point, I was frustrated and discouraged. I am well aware of the racial and gender bias in the finance industry and the ways in which discriminatory policies are written into the system. I fight against this prejudice every day at EnrichHERa fintech platform I founded in 2019 that makes access to capital easy and affordable for businesses led by women and people of color.

However, this current battle felt particularly insulting given how much time I spent making sure my finances exceeded the basic requirements for a home loan. I ended up consulting with a retired underwriter who happened to be Black. She told me that she never denied anyone like me during her entire career in the mortgage underwriting industry. She also told me that I either had to decide to let discrimination win or accept that I would have to keep trying to find an institution willing to finance someone who looked like me.

After that conversation, I took the advice I often give my clients and began looking for a lending company with a diverse staff (which the previous ones did not have). Organizations with employees that reflect the communities they serve are more likely to have fair and unbiased underwriting policies.

I ended up being referred to several lenders with very diverse teams. This time, I told the owner of the brokerage company why the first two institutions denied me, and he immediately told me that neither of those facts were issues. Shortly after reviewing my application, this third and final company set a closing date for three weeks later.

My experience was not unique

As infuriating as this experience was, it is, sadly, not an isolated one. For decades, US banks have engaged in redlining, denying mortgages to Black and Latinx families who live in certain areas. When it comes to business lending, predominantly white neighborhoods receive, on average, about twice as many small-business loans per capita compared to Black neighborhoods. The annual number of US Small Business Administration (SBA) loans to Black businesses has decreased 84% since before the 2008 financial crisis.

Although redlining was outlawed by the Fair Housing Act of 1968 and the Equal Credit Opportunity Act of 1974, the practice still exists today. According to a New York Times report, 75% of the government’s initial round of Paycheck Protection Program (PPP) loans in 2020 went to businesses in majority-white census tracts. The nation’s four largest banks — Citi, Bank of America, JPMorgan, and Wells Fargo — made 91% fewer SBA 7(a) loans to Black-owned businesses in 2019 than in 2007.

These unlawful practices have had a devastating impact on society, trapping families in poverty for generations. Imagine how much economically stronger communities of color would be today had they been able to establish themselves in business and real estate decades ago.

3 steps to take before making a major financial move

Still, there are steps you can take to empower yourself before embarking on any financial process:

  • Do your research: Educate yourself on how loans work, what the current interest rates are, the documentation required to apply, and the different loan products available to you. Shop around and compare offers from a variety of lenders. Find out as much information as you can and take your time with it. Don’t rush the process!
  • Know your credit history: This is so important! Your credit score weighs heavily on your ability to get a loan. If you know you have some issues on your report, handle those first, if you can. You can apply for a loan no matter what your credit score is, but understand that the terms and rates may not be affordable.
  • Patronize platforms and companies that want to see you win: Traditional banks are not the only game in town. There are a number of companies in the financial technology (ie “fintech”) space – like EnrichHER – that cater to underserved consumers. These companies provide everything from online banking to lending to payroll processing and are often intentional about impacting the community.

You have the right to take legal action if you feel you were discriminated against. Resources such as the Legal Services Corporation and LawHelp.org can help you find civil rights attorneys in your area that will help you get justice. You can also file a complaint against the offending company with the Consumer Financial Protection Bureaua federal agency that enforces consumer financial law.

Frankly, more needs to be done about the racism and discrimination in the financial sector. I try to do my part as a financial inclusion advocate, but it isn’t enough. Change will come when diverse consumers start to put their resources into financial institutions that are committed to the economic well-being of their communities.

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