Do Blacks Pay More Than Whites for Mortgages?

(MoneyWatch)  Dear Ali: I hear that the NAACP has started suing some mortgage lenders for racial discrimination. What's that about, and how do I make sure that I get the best loan rate regardless of my race?

A: Since the subprime mess has hit communities of color pretty hard, the question keeps popping up: Were the consumers sold subprime loans because they were minorities, or did many of them just get caught up in this mess because they were poor?

The NAACP alleges the former and filed suit in mid-March against subsidiaries of two big banks, Wells Fargo & Co. and HSBC Holdings, to try to see if blacks got different mortgage terms than whites, according to the Los Angeles Times. The theory is that minority homebuyers were pushed into subprime loans at times when whites weren't, even if they had the same assets and income.

The banks (and here's my disclosure: I'm trying to buy a co-op, so I may be dealing with one of these entities to get my mortgage) hotly and flatly deny these charges, saying that of course they don't discriminate.

The case puzzles me a little because I didn't know that people even got mortgages face-to-face anymore; I got my last two over the phone from someone at Citibank who I have never seen. But that might also be a feature of subprime lending: The mortgages may have been made from storefronts in communities rather than over the Internet. We'll learn more as the cases, filed in U.S. District Court in Los Angeles, move forward.

The more immediate consumer question is: How can I make sure this doesn't happen to me?

First off: make your credit score absolutely as good as it can be. More about this in future posts, but the things you simply must do are:

• Pay your bills on time
• Pay down your credit cards (you want your highest balance to be no higher than 20 percent of your charging capacity, so if you have a $5,000 credit limit, you don't want to use more than $1,000 of that)
• Get rid of errors on your report by pulling your credit report and looking it over. You get a free pull from each of the major agencies once every twelve months, so get your Experian report, and then four months later orderl your Transunion report, and then four months later pull your Equifax report -- and then start again.

Once your credit report is perfect, you then need to get the best mortgage rate for your credit score. And the way to get the best rate is the way you'd do it for anything -- shop around!