Credit Scores Keeping You Down
In a world of have’s and have not’s, only in a privileged country like the USA, can we have a financial caste system as seemingly innocent as a credit score. There are those with great score and those with poor scores. A good score goes relatively unnoticed, it’s only when you have a bad score that your credit score and report can have a major impact on your financial life.
Even been turned down? Maybe you have, maybe you haven’t. Getting a date, a job, or wait, how about getting a loan, or a credit card? Sometimes you get turned down because you just don’t have the right stuff, but sometimes, it’s just bad luck or unfortunate circumstances. Nonetheless, there is a psychological impact when you get turned down. You could almost argue, that a bad score for some, which leads to getting turned down or relegated to “less desirable”, could just continue the cycle.
The secondary loan market was born in the bowels of bad credit scores. The same is true for credit opportunities where the credit score challenged are relegated to higher fees, higher rates, and sometimes credit needs to be secured. Understandably the credit companies are taking an extra risk when they extend credit to poor scorers, but certainly they could be abusing the low expectations. Mortgages on the other hand are almost proudly available for the secondary market.
In fact, so many less desirable candidates obtained mortgages in recent prosperous years, and the default rate on those loans could skyrocket if the economy makes and significant downturn. So what’s the point of a credit score? What’s the point of the secondary market? To make a profit for those lenders. The credit score rarely means denial, unless it is awfully low. What it does equal is justifying high rates and fees. The bad news is the default rate could increase, lenders could get hammered, and the economy as a whole could suffer.
So the poor credit scoring have not’s get a shot at having the things the good scorers have, but like the lenders, they themselves are taking a risk. That they can afford the fees and rates, that their investment won’t get wasted in foreclosure or bankruptcy, and risking that down the road, they’ll be back to having not.
Thee moral of the story is it takes something to have a good score, and it is worth pursuing. In order to have a good score, you need to do what good scorers do, and that means pay your bills on time, and keep your finances clean. And for those who have already sunk their credit ship, I say “rebuild!” Or you will risk getting caught up in the financial tidal bowl. A good score is really easy to have, but not so easy to get for some.
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