DEFINITION of 'Redlining'

The unethical practice whereby financial institutions make it extremely difficult or impossible for residents of poor inner-city neighborhoods to borrow money, gain approval for a mortgage, take out insurance or gain access to other financial services because of a history of high default rates. In this case, the rejection does not take the individual's qualifications and creditworthiness into account.


In some cases of redlining, financial institutions would literally draw a red line on a map around the neighborhoods in which they did not want to offer financial services, giving the term its name. Although the Community Reinvestment Act was passed in 1977 to put an end to all redlining practices, critics say the discrimination still occurs.

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