THE CREDIT PIMPS.

ARE YOU BEING PIMPED BY THE SYSTEM?

To people reared in educated and or affluent environments and households, they may be taken aback when I say that no one ever sat down and told me the value of your credit rating in life. Not only was I void of this knowledge...as the most junior child, I feel victim to my elder siblings using my name and identity to get different types of credit. Needless to say, my credit was bad before I reached adulthood. I subsequently exacerbated the situation, not understanding the importance of it in combination with not making long terms plans in my life at that time.

I have come to realize, the hard way, just how important credit is in a persons economic life. Having good credit can save you hundreds of thousands of dollars over a lifetime, from big ticket items like homes, autos, boats and the like. Not only that, in order to rent a car and stay at many hotels, they want you to have a credit card. We are living in a credit society these days and your worth is judged by your credit rating score.

In light of the times that we live, having good credit can save you plenty of money in the long run and having bad credit can cost you. When I say cost you, I mean that it gives financers an excuse to exploit you. Financers can’t make much of a return off people with good credit, because they are given such great interest rates and other deals. Those people with terrible credit and who would end up costing the financers in bad loans are not given loans. Thus, the profit margins come from exploiting those with marginal credit. These are the people who are likely to pay, but have sometimes had late payments and a moderately low credit rating.

Some of the practices simply do not make much sense. For example, the insurance industry, in some states, charge higher premiums based upon your credit score. Is there a correlation between having bad credit and being getting into accidents or having more claims? The insurance actuary industry seems to think so. I would venture to guess that bad credit manifest in every class strata, but most profoundly among the poor. The poor tend to live in poor communities with higher congestion and crime rates, which likely lead to more accidents and property crimes, resulting in more claims. Thus, it seems to me that the higher claim volume is linked to poverty and not credit score. The insurance industry already penalize you for living in higher crime and congestion, thus increasing it for bad credit is simply penalizing them twice for the same phenomenon.

Not only that, what about home mortgages? If you have had an impeccable rental payment history, but have had some problems paying your car or credit cards on time and went into delinquency on other small accounts, the only thing that should matter is you rental payment history. The reason being is that people naturally place their bills in a hierarchy, based upon their needs. If people cannot pay all their bills, they will usually prioritize paying what they need the most, which is usually a place to stay. If a person does not have a rental payment history, then the credit score would have more weight. But if one has such a history, that payment history, and not credit score, should determine your credit worthiness and hence interest rate, but it does not.

It all seems rather counter intuitive. If a person has had trouble paying their bills or have a less than favorable income to debt ratio, then charging them more seems that it would only increase the probability that they could not pay it back. It seems akin to giving a person more bricks to carry, because he demonstrated an inability to carry previous loads. Does that not seem counter intuitive? On the other hand, the person who has demonstrated the abilityt to carry the load on time is rewarded with less bricks to carry. Its a punitive system.

The truth is that this is how a lot of finance companies are increasing their profit margins, by exploiting those with marginal credit and throwing in all these fees. Being black only exacerbates the situation, because studies have shown that blacks, even with good credit, are charged higher rates than whites, everything else being equal. Thus, a black person with bad credit, but not terrible credit, will be charged extremely higher rates for credit than they should be charged. Hence, if you plan on having something in life….PLEASE CLEAN UP THAT CREDIT and ALSO PLEASE TEACH YOUR CHILDREN THE VALUE AND NEED OF HAVING GOOD CREDIT.