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The Issues

LGBTQ Credit Discrimination: What It Looks Like and How to Overcome It

Team Daylight
Consider this: According to the Federal Reserve, 40% of Americans couldn’t come up with $400 to pay an unexpected expense. Credit can fill the gap if you’re short on cash to cover a vet visit or an auto repair, but there’s a definite equality gap.

What does credit discrimination look like? 

Credit has a lot of different meanings. Here we’re talking about money that’s given to you under an agreement, which you repay. In practical terms, this could be a car loan, mortgage loan or credit card where you can charge up to a predetermined limit. 

In each of these cases, a lender has agreed to cover big-ticket expenses (like a car or house) and be repaid over time by the borrower — that’s you.

While lenders unfortunately have track records of anti-LGBTQ practices, there are also valid reasons lenders deny loans or assess higher interest rates. If you don’t get the loan terms you want, it might be discrimination. But it might be that lenders consider you a bad bet. (Yikes.)

Be honest about your creditworthiness. If you have a history of late payments or defaults, it’s not the lender; it’s you, boo. 

If you’re an otherwise creditworthy applicant and things don’t go your way, it could be discrimination. Here are a few real-world examples of what LGBTQ credit discrimination looks like. 

Same-sex couples being denied mortgages or offered worse terms 

Same-sex couples are denied home mortgages far more often than different-sex couples. 

Assuming that you’re otherwise attractive from a mortgage lender's perspective (you're not self-employed, your debt-to-income ratio isn't excessive, your credit score is good and you make enough income), this could be an instance of discrimination. 

You’re charged a higher interest rate for being LGBTQ or gender nonconforming 

Lenders may assess a queer borrower a higher interest rate than they would a cis, straight borrower with a similar application. 

When same-sex couples are approved for mortgage loans, for instance, they often pay more in closing costs and interest, the National Community Reinvestment Coalition found. 

You can’t really know if you're being charged a higher interest rate than a similar applicant. But you can comparison shop for loans to get an idea of what’s fair. Get quotes from at least three lenders. Carefully review the terms and conditions, including interest rates, before you commit. 

You're asked about your spouse's income when it’s irrelevant 

Lenders can legally ask about your spouse's income if they are a co-applicant. They can also ask if you receive alimony, child support or other spousal payments where the loss of these payments could impact your ability to repay the loan. 

If your spouse’s income isn’t relevant to your ability to repay, or they’re not listed on your loan application, a lender shouldn’t fish for personal information. Lenders who ask marital status questions that seem irrelevant or invasive could be discriminating. 

You're treated differently once a lender realizes you're queer or trans 

Lenders must treat people equally. They cannot discriminate based on gender identity, gender conformity or sexuality. 

If a lender discovers that you're trans due to a credit report's use of a deadname, they cannot change the way they treat you. 

For a same-sex married couple, lenders cannot request any extra documentation, such as documentation beyond the marriage license that proves your relationship. 

Many LGBTQ people have a finely-tuned sense for this sort of subtle discrimination, honed through repeat encounters with homophobia and transphobia. If you think something is off, trust your gut. You have other options of lenders, and you don't have to give someone your business who doesn’t treat you fairly. 

Ways to protect yourself when shopping for loans 

The best way to protect yourself against discrimination is to be prepared when shopping for a loan. Here are some ways to ensure you’re prepared.

  • Check your credit report. If there are any inaccuracies, you can have them corrected to improve your credit score (and potentially the terms of a loan offer). 

  • If your credit score is low and you have the luxury of time, wait. Boost your credit score, then put in your application. A higher credit score often leads to a lower interest rate. 

  • Educate yourself on what lenders are allowed to ask and what types of questions are off-limits. If a lender asks an inappropriate question, you do not have to answer it. 

  • Identify several lenders ahead of time. Choose a variety of lenders, such as a local credit union, a local bank, a national bank and an online lender. Wait to decide until all your offers are in. When you’re comparing four quotes, it’s easier to spot anomalies that suggest discrimination. 

  • Understand your loan. Loans may come with hidden fees that affect your payments. Before you accept a loan, make sure you understand what you’re really agreeing to. 

Legal protections against LGBTQ credit protection

In March of 2021, LGBTQ people gained federal protection against credit discrimination. 

Thanks to a rule change by the Consumer Financial Protection Bureau (CFPB), it’s no longer legal for lenders to discriminate on the basis of gender identity or sexuality. The agency clarified the existing sex discriminations regulation in the Equal Credit Opportunity Act to expressly include sexual orientation and gender discrimination. 

The Equal Credit Opportunity Act now prevents discrimination based on actual or perceived gender and sex nonconformity. LGBTQ consumers who believe they've been discriminated against can now launch a complaint with the CFPB who will investigate the incident. 

Credit discrimination for gender identity and sexuality is also prohibited in the following 15 states as well as Washington D.C.:

  • Massachusetts
  • Rhode Island 
  • Maine 
  • Connecticut
  • New Jersey
  • New York
  • Vermont
  • Virginia
  • Illinois
  • Iowa
  • Minnesota
  • New Mexico 
  • Colorado
  • Nevada
  • Washington

Additionally, North Dakota and Alaska interpret existing sex discrimination laws to cover sexuality and gender identity. 

Earlier this year, the House of Representatives passed the Equality Act. This act, which is currently under the Senate’s consideration, would codify protections for LGBTQ people across all financial services. 

You have options: What to do if you think you're being discriminated against 

We're hoping the Equality Act advances to cement full financial protection for LGBTQ Americans. In the meantime, what should you do if you think you've faced credit discrimination? 

  • Work with the lender. The CFPB recommends working with the lender as a first step if you think you're being discriminated against. Take a few minutes to gather your thoughts. Avoid the temptation to lash out via social media or post on a consumer review site. Write down what happened as you recall it and what could remedy the situation. Gather any documentation to support your side of the story. Then contact the company's customer support line and request they remedy the situation. Hey, you don’t know unless you ask.

  • File a CFPB complaint. If the lender refuses to work with you, the CFPB has your back. File a complaint about the company, and the CFPB will work with you to get the issue resolved. This is a helpful step when you feel too hurt or angry to work directly with the company on a successful resolution. 

  • File a Federal Trade Commission (FTC) complaint. The FTC doesn't resolve individual complaints, but they do maintain a database of consumer complaints. Enforcement agencies may be able to identify discriminatory lenders through this database. Share your story with the FTC and you could help them crackdown on a discriminatory lender. 

  • Talk to a lawyer. You may retain a private lawyer, but that’s an expensive proposition. Consult your state attorney general or a legal aid office to better understand your legal options. 

The CFPB rule change provides a national option to curb anti-LGBTQ lending practices. But it’s up to us to hold lenders accountable. Knowing what anti-queer credit discrimination looks like makes you an empowered loan shopper.