First, using credit score to base a person’s financial ability is DUMB. More and more companies are doing it for mortgages, insurance, to rent an apartment and even job applications! There are some people who have a credit score of zero because they do not borrow money. This means they would be denied an apartment lease or have higher insurance rates.
Second, there is a huge push for people to feel that the amount of credit extended to them is an indication of net worth. They feel the score from the Fair Issac Corporation gives them a measure of worth that is not there. You have probably seen the commercials where the guy says, “I’m thinking of a number…”
I don’t trust credit agencies. Anybody (or any company) who claims that they’re going to help you with anything related to money is in it to make money FROM you.
The same way the entertainment industry pushes sex to young adults in order to get them to buy more of their products, credit is pushed to middle America as a way to “achieving the life you deserve.” There is a bank commercial where the people daydream in the storefront glass window about what they could be doing. I too had gotten swept up in the hype. I did not understand the mind game that was being played on me and just how much it was affecting me financially.
It was only when I saw a financial debt free live event that my entire outlook on money changed. I began to understand the workings behind the strategies, promotions and offers that were all around me. I was able to look my bank teller in the eye and kindly turn down their offer to loan the money I just deposited, at 3% interest, back to me at an introductory rate of 12% interest for the first three months. Now, anytime I hear the words “loan”, “credit”, “finance”, “interest” or “FICO” I pay attention. I haven’t done it yet but I intend to count how many “loan” commercials I see on TV during any given night.
This is a sad story. Far too many people do not understand credit. Moreover, it’s in the industry’s best interest to keep this kind of information at bay. Managing money isn’t easy, and sometimes it’s up to smart software to help (as recorded by Ponzi in her post about Small Business Accounting Software.
Another thing I woke up to was that, in my experience, many people in the finance community treat information regarding the pitfalls of credit as their own personal secret. I have encountered more than three times a situation where I briefly mention what I have learned and the response is something like, “That is very sound financial advise.” One of these instances was from the very same bank teller mentioned above. My frustration is that more people are not talking about this.
Amen, Bill! Where else can we turn for true credit help?