The Use (and Overuse) of Credit History
Credit-based ID Verification Creates Barriers to ACA Access
By National Immigration Law Center and Corporation for Enterprise Development
Credit history is a key determinant of who can get ahead financially and who cannot. While it was originally intended to be used by lenders to assess whether or not to approve a consumer for new credit, credit history is now used for many nonlending purposes. Although credit reports can be a good source of information regarding loan repayment and borrowing history, there are few links between credit history and some of its more recent applications, such as getting a job, renting a home, or obtaining medical insurance.
Credit history verification is required for enrollment through most of the marketplaces created by the Affordable Care Act (ACA). The Federally-facilitated Marketplace (FFM) is where consumers shop for insurance plans that fit their needs. Some marketplaces are state-run, while other states use the FFM.1 Individuals who wish to purchase insurance for themselves or for a family member through most state exchanges and the FFM2 must undergo an identity verification process to create an online account. This verification process relies heavily on an individual’s credit history.
Pulling credit reports for noncredit purposes creates hardship for millions of Americans. A growing number of Americans are paying the price for having poor or no credit history, not only through higher interest rates, but also through reduced economic opportunity. This has long-term consequences for low- and moderate-income households that are struggling to get their financial footing. Individuals and families with no, thin, or poor traditional credit histories have fewer opportunities to access affordable credit products. Moreover, denying such opportunities to individuals with no or poor credit history creates a cycle of lost chances to stabilize their families through employment, housing, and health care.
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