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February 06 2017

Operation HOPE to Examine the Relationship between U.S. Consumer Credit Scores and Community Instability and Criminality in New Research Study Report

  • Report findings could have significant implications on policy debates around community wellbeing, safety, crime, social tension, economic growth, financial literacy and intervention strategies that could change the trajectory of the nation’s failing cities.

  • Preliminary results to be released at the 2017 HOPE Global Forums | Annual Meeting in Atlanta in April.  

ATLANTA – Feb. 6, 2016 – Global financial dignity and economic empowerment nonprofit Operation HOPE, Inc. announced today a new research study to explore the relationship between consumer credit scores and community wellbeing, including safety, crime, tension, economic growth, and financial literacy. The organization posits that communities with high credit scores have lower levels of crime, fewer homicides, and fewer instances of civil unrest than communities with low credit scores.

“Do 700-credit-score communities riot? Operation HOPE believes they do not,” said John Hope Bryant, founder, chairman and CEO. “In an era where credit scores—a calculated metric of a person’s financial history—are used as a screening tool that expands well beyond consumer credit, HOPE foresees yet another application: a predictive tool for community instability, economic decline, and criminality.”

Credit scores tap into personal characteristics that surpass a person’s creditworthiness. Research has shown that human-capital characteristics, such as education, cognitive and non-cognitive skills (e.g. self-control and perseverance), are the same characteristics that underlie credit scores. In addition, HOPE theorizes that credit scores also indicate an individual’s level of hope for the future, and that communities that suffer a deficit of hope are unstable, stagnant, and potentially dangerous.

Credit scoring techniques are used by many industries to facilitate risk assessment. Companies use credit scores to price cell phone contracts and cable TV bills, to set interest rates for college loans, to tier premiums for car insurance, and to advise eligibility for employment. Health insurance and life insurance companies incorporate credit scores into predictive models of health and longevity. However, little is known around how credit scores affect communities in the aggregate. What happens if you have a high concentration of individuals who avoid risky and impulsive decisions, who plan and manage their finances and who generally organize their lives? Is that community more stable? Economically stronger? Healthier? Safer?

“Often, lists ranking American cities with the lowest average credit scores are identical to the lists ranking the most dangerous cities,” Bryant said. “Is this a coincidence? Or, do credit scores give us insight into a domain of life that potentially can predict riots, economic decline, crime, and wellbeing—or lack thereof—of a metropolitan area?”

Beyond a potentially predictive model, answers to these questions could have significant implications for policy debates around community safety, economic growth, financial literacy and intervention strategies that could change the trajectory of failing cities. Can credit scores in the aggregate be a measurement of difficult-to-observe psychological traits and personal background information and thus be a predictive index with wide application? If the above hypotheses are found to be correct, financial literacy and credit counseling programs may prove to be intervention strategies that have consequences that reach far beyond positive financial behavior and improved creditworthiness.

A team from the HOPE Office of Innovation Research and Assessment is currently exploring these theories to potentially increase understanding around the need for financial dignity empowerment for all Americans. The preliminary findings of the report, entitled, “Do 700-Credit-Score Communities Riot?” will be presented at the 2017 HOPE Global Forum, that will be held in Atlanta, April 10-12.

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About Operation HOPE

Since 1992, Operation HOPE has been moving America from civil rights to "silver rights" with the mission of making free enterprise and capitalism work for the underserved. Through its core programs, the nonprofit has provided financial dignity and economic empowerment to over 2.6 million individuals worldwide, and $2 billion in economic activity for the disenfranchised—turning check cashing customers into banking customers, renters into homeowners, small business dreamers into small business owners and minimum wage workers into living wage consumers.  Project 5117 is HOPE’s multi-year four-pronged approach to combating economic inequality that aims to improve financial literacy, increase business role models and business internships for youth, and stabilize the American dream by boosting credit scores. Operation HOPE recently received its second consecutive 4-star charity rating for fiscal management and commitment to transparency and accountability by the prestigious non-profit evaluator, Charity Navigator—further establishing it as a best-in-class organization. 

For more information: www.OperationHOPE.org

Follow Operation HOPE on Twitter @operationhope