Do you want to buy a house? Do you want to buy a car? Do you want to purchase insurance for that house or car? Do you want to get a new job? Then you better make sure that you have a good credit score? That is, if you can do something to improve your credit score to the top ranking
What is a Credit Score – The credit score is a 3 digit label that is used to classify borrowers. It is supposed to tell a financial lender how risky it is to lend you money. From first glance, the concept of a credit score is a good idea. If I were a bank, and I was lending money, I would want to know if the borrower is going to pay me back or not.
So what is the problem with the credit score? There are several things wrong with the credit scoring system
1) Secrecy of credit scoring methods – For something, such as a credit score, to be so widely used, you would think that the method of generating the score would be transparent. Instead, the credit scoring formula is a well-guarded secret. All credit reporting agencies strongly maintain that factors such as age and demographic are not factors when generating the credit score.
- Demographic / Ethnic discrimination – According to the “Report to the Congress on Credit Scoring and Its Effects on the Availability and Affordability of Credit“ which was submitted to the Congress pursuant to section 215 of the Fair and Accurate Credit Transactions Act of 2003, “blacks and Hispanics have lower credit scores than non-Hispanic whites and Asians, and individuals younger than age 30 have lower credit” scores than older individuals. Coincidence, well the federal government does not think so.
- Age discrimination – The credits scoring bureaus also maintain that age is not a factor when determining a person’s credit score. However, information released by the credit bureaus themselves directly contradicts this statement. The credit reporting agencies use the length of a person’s credit history as a part of their calculation. The longer the credit history, the higher the credit score. In the US, most people do not obtain credit until they are 18 years of age. If a person has an average credit length of 20 years, then this person most likely is at least 30 years old. So in turn, the younger a person is, the lower their score will be. So the 25 year old gets penalized for not having credit long enough. Is this age discrimination. Yes, Yes, Yes.
The secrecy involved in calculating this score is enough to invalidate this score. If this were a fair score, then everyone would be able to see how this score is calculated.
2) Ownership of Credit Data – All of the information in your credit report is about you. It is your information. But in order for you to access ‘sensible’ information from this report (your credit score) you have to pay for it. If this information is about you, you should be able to access this information at any given time, or you should have the option of removing your information from the databases for the credit reporting agencies. Unfortunately, you cannot do this. The credit bureaus own your information. Furthermore, these credit agencies sell your information for a profit without you getting a profit. How can this be legal? If someone uses your image or a photo of you for a profit, you are eligible for some of the proceeds. Why does the same concept not apply to the credit reporting system?
3) Credit Scores are not just used for lending – OK, so let’s say that a good credit score is a good indication of your likely hood to pay back a bank loan. But how can using a credit score for a home owner’s insurance policy be justified. How can using a credit score for a car insurance policy be justified? How can using a credit score to justify getting a job be justified? So, let’s say that working Joe gets fired from his job, not because he can’t perform but because his job moved to China. Working Joe who has always paid his bills on time is late on a couple of bills and has a medical bill go into collections. His credit score then plummets. Working Joe then gets a job interview and they pull his credit report before making him a job offer. They see that he is struggling with his bills so they either don’t give him the job or make him a low ball job offer because he desperately need a job, instead of paying him what he’s worth.
The credit score is a 3 digit label that is not just used to classify borrowers. It is used as a tool to stop to keep the poor just what they are, poor. The poor generally have lower credit scores. This equates to higher interest rates and lower paying jobs. The higher interest rates make it harder and harder for the poor to pay their bills. The lower and declining wages make it even harder for the poor to pay their bills. Non-payment of bills equates to an even lower credit score. It is downward spiral that once someone enters into it, it can sometimes take an act of god, like winning the lottery for a person to get out of.
4) The Numbers Don’t Match Up – Probably one of the most in your face facts about how there is truly a Credit Conspiracy is that each credit reporting agency has a different low score and high score.
These are the low and high scores taken directly from the 3 major reporting agencies website.
Transunion 501 – 990
Experian 330 – 830
Equifax 280 – 850
You don’t have to be a math genius to figure out this is a major problem! Normally creditors will use a combination / average of each of your scores to get a final score. If each reporting agency has its own number system how can you really have an equally average score?
What Credit Reporting Agencies Don’t Want You To Know About…
These are privately held for profit, Wall Street corporations. They are in the business of collecting and selling our personal data for a profit without compensating us.
They issue more than 3 billion consumer reports a year and maintain files on more than 200 million Americans.
According to the CFPB (Consumer Financial Protection Bureau) the consequences of errors in a consumers report can be catastrophic for a consumer, shutting him or her out of credit markets, jeopardizing employment and new employment opportunities or significantly increasing the cost of housing and interest rates.
Another little known revenue source that all 3 major credit reporting agencies make 100’s of millions of dollars per year is memberships to businesses allowing them to check your credit and put information on your report.
The problem with that is they don’t ask the credit or debt collection agency if the information is accurate.
ABC News Report – Julie Miller sues Equifax and win’s $18.6 million dollars over errors they REFUSED to correct on her report. Even after she showed them proof that it was incorrect.
What are your constitutional rights regarding your credit reporting and debt collection practices? CLICK HERE TO SEE WHAT YOU CAN DO ABOUT IT.